mania has taken the world by storm, with the game-changing tech seemingly poised to permeate almost every aspect of our day-to-day lives over the next few years. But is it really as inevitable as it seems?Maximize Your Portfolio with Data Driven Insights:
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- Your Smart PortfolioWhile one fear tied to the rise of AI revolves around concerns it will make many jobs obsolete, Billionaire Ken Griffin is doubtful AI will soon replace human jobs, citing drawbacks in machine learning models when applied to certain situations.
“Machine learning models do not do well in a world where regimes shift,†noted the Citadel founder and CEO. Illustrating his point, he added, “Self-driving cars
don’t work very well in the North due to snow. When the terrain changes, they have no idea what to do. Machine learning models do much better when there’s consistency.â€Â
Griffin is no luddite, however, his hedge fund and electronic market-making firm have been leaders in automation, and his skeptical stance does not mean he has been entirely shying away from the AI opportunity.
Lately, the billionaire has been fine-tuning his AI stock portfolio, shuffling his stakes in industry giantsNvidia (NASDAQ:NVDA)andAlphabet (NASDAQ:GOOGL). He’s made a big bet on one while trimming his holdings in the other.
So, let’s take a closer look at these two tech colossuses and by delving into the TipRanks database, we can also find out the broader Street view on these names.
Nvidia
Talk of AI and its impact on the stock market and the conversation will naturally turn to Nvidia. While the chip giant was far from a minnow when AI first started making its impact following the release of ChatGPT, Nvidia’s positioning inthe space has turned it into one of the world’s most valuable companies.
The reason for that is pretty straightforward; the Jensen Huang-led firm simply makes the best AI chips out there and no other company has so far managed to seriously impact its dominant position. The proof is in the chip pudding: Nvidia commands more than 80% of the AI chip market.
But are cracks starting to appear in the tremendous growth story? One recent headwind has revolved around the delay of its latest GPU architecture, Blackwell, but the company might be facing a threat that seemingly came out of nowhere last month. Chinese startup DeepSeek released itslatest AI model with claims it can outperform its US peers. Not only that, it also said it was developed at a fraction of the price, meaning that maybe companies didn’t need to spend enormous sums of money developing their AImodels.
What followed was a slice of history with Nvidia losing the biggest chunk of market cap over a single session, shedding $590 billion of its value in one day.
Maybe Griffin sensed a day of reckoning for the high-flying stock was about to play out. During 4Q24, he sold 57% (3,993,858 shares) of his NVDA holdings. It should be noted that he still holds 3,128,677 shares, currently worth more than$434 million.
According to D.A. Davidson analyst Gil Luria, it might be time to approach the Nvidia story with caution. Looking at the situation following DeepSeek’s noisy entry, he thinks Nvidia might have to face a new reality moving forward.
“We believe we are approaching peak demand, possibly as early as this year as NVDA’s large customers evaluate [the] recent developments,†the 5-star analyst said.“The notion that radically lower prices will led to much higher demand is almost a truism, but in previous instances took time to play out. We believe that lower inference prices will allow enterprises to roll out some new tools faster thanthey were otherwise planning to, but do not believe there are enough compelling applications for that to increase short-term demand by the 20-30x factor required to make up for the lower need for compute. We see the availability of ready-for-primetimescalable applications as the real gating factor and that may take 2-3 years to materialize. More importantly, as it relates to NVDA, if these new applications get deployed on device, the increased demand may not increase the TAM.â€Â
To this end, Luria rates NVDA shares as Neutral, while his $135 price target suggests the stock will remain rangebound for the time being. (To watch Luria’s track record,click here)
That said, most on the Street are still getting behind the AI chip leader; based on 37 Buys vs. 3 Holds, the stock claims a Strong Buy consensus rating. Going by the $179.03 average price target, a year from now, shares will bechanging hands for a ~29% premium. (SeeNvidia stock forecast)
Alphabet
While Nvidia is a company that so far has benefited immensely from AI’s rise, the tech has been seen as something of an issue for Alphabet – parent company of Google, YouTube, Android, Waymo,DeepMind, and other subsidiaries.Â
Despite actually being an AI pioneer, having been using the tech long before the current AI boom, the rise of GenAI is perceived as a real threat to Google’s core Search business. It’s a narrative thatmakes sense in a way. AI-powered chatbots like ChatGPT, Claude, and Perplexity are changing how people seek information. Instead of googling something and clicking on links, users can now get information without leaving the platform. This reduces Google’s main bread-and butter – ad revenue, which heavily relies on search traffic. There’s also direct competition from other AI-powered search engines, with Microsoft, for example, integrating AI intoBing.
Alphabet, for its part, has no intention of getting left behind, and has been aggressively expanding its AI capabilities to counter the threat. It has integrated Gemini AI (formerly Bard) into Search and other products and is competing with Microsoft and AWS by offeringAI-powered tools for businesses and cloud computing.
That said, the shares fell following the recent Q4 readout with Cloud growth being a particularly sore point. Google Cloud’s revenue fell short of expectations, coming at $11.96 billion vs. the Street’s forecast of$12.19 billion. Additionally, the company forecasted $75 billion in capital expenditures for 2025, far above the consensus estimate of $58.8 billion.
Griffin, however, must think all these worries are overblown. During Q4 he significantly increased his GOOGL holdings by 135% with the purchase of 786,737 shares. His total stake now stands at 1,372,475 shares, worth more than $254 million at the current share price.
Mirroring Griffin’s move, RBC’s Brad Erickson, an analyst ranked in the top 2% of Street stock experts, strikes a confident tone regarding the search giant’s prospects. Followingthe Q4 results, he wrote, “The company’s AI rollout is accelerating with Search demonstrating improvements as opposed to disruption (consistent with our checks coming in), capacity constraints which likely explain the Cloud missshould ease, Google I/O sets up for a bevy of new AI product announcements and management just lowered the bar on margins given Capex & headcount commentary. No doubt the impact of AI for GOOGL will continue to be hotly debated but intellectual consistency across thespace would suggest GOOGL’s playing offense on AI & we’d agree.â€Â
“We’d expect a number of substantive announcements at I/O in early May, however, given the clear breakneck pace of model rollouts in fueling the various products (7 products or platforms now with over2B users which leverage Gemini), we see the narrative around GOOGL’s overall AI positioning as improving over the medium term versus getting worse,†the 5-star analyst further said.
Conveying his confidence, Erickson rates GOOGL shares as Outperform (i.e., Buy) while his $235 price target makes room for 12-month returns of 27%. (To watch Erickson’s track record,click here)
26 other analysts join Erickson in the bull camp and with the addition of 10 Holds, the consensus view is that this stock is a Moderate Buy. The average target stands at $215.85, suggesting the shares will climb 16.5% higher in the months ahead. (SeeGOOGL stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.