Diamond Hill Capital Management, LLC on Alphabet Inc.
Thesis
Diamond Hill initiated Alphabet because it believes AI is enhancing rather than destroying the core Google search and advertising business. Its products can incorporate AI to sustain user relevance and create additional opportunities. Google Cloud has also emerged as a leading AI infrastructure platform, contributing profitable growth. The manager sees a high-quality digital franchise whose long-term earnings prospects are supported by several AI-related businesses.
“AI is strengthening its core search and advertising business as well as several other products.”
Key risks
- AI changes to search could alter advertising economics
- The scale of AI infrastructure investment may challenge near-term returns
- Higher market interest rates can pressure valuations