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Slightly Bullish +25

Billionaire Bill Ackman Sells Alphabet Stock and Buys a Mega-Cap Stock Down 42% From Its High

AI-generated analysis

📉 Bill Ackman's Pershing Square sold its entire stake in Alphabet (GOOGL) in the second quarter while initiating a position in Netflix.

💰 Alphabet reported $120 billion in revenue and 31% growth in GAAP operating income, marking the 12th consecutive quarter of double-digit revenue growth.

🤖 Google Cloud revenue surged 82% in the second quarter, driven by strong demand for AI infrastructure and external sales of custom TPUs.

⚠️ Alphabet recorded negative free cash flow for the first time as a public company after raising its 2026 capex guidance to $200 billion.

📊 CEO Sundar Pichai reported that Gemini APIs now process 22 billion tokens per minute, with 90% of Fortune 100 companies using Gemini Enterprise.

🏆 Google gained two percentage points of market share in cloud infrastructure and platform services over the past year.

📉 Alphabet's stock fell sharply following earnings and trades 2% below pre-report levels as investors debate heavy AI spending.

🎬 Ackman is buying Netflix, which is down 42% from its high due to failed bidding wars for Warner Bros. Discovery and Roku.

💵 Wall Street analysts view Netflix as undervalued with a median target price of $94, implying 20% upside from the current share price.

📈 Alphabet's advertising products still account for more than two-thirds of total revenue, though cloud computing is becoming increasingly consequential.

Bullish Signals
  • Alphabet reported strong financial results with revenue rising 24% to $120 billion and GAAP operating income increasing 31% to $41 billion in the second quarter.
  • Google Cloud revenue accelerated by 82% for the fifth consecutive quarter, driven by robust demand for artificial intelligence infrastructure.
  • For the first time, Alphabet earned revenue from selling custom AI accelerators called TPUs to external customers, directly competing with Nvidia.
  • Gemini APIs now process approximately 22 billion tokens per minute, a significant increase from 16 billion in the previous quarter.
  • Google has gained two percentage points of market share in cloud infrastructure and platform services over the past year.
  • CEO Sundar Pichai stated that 90% of Fortune 100 companies are currently using Gemini Enterprise, an AI platform for business work.
Risk Factors
  • Alphabet reported negative free cash flow for the first time as a public company, raising concerns about its spending on AI infrastructure.
  • The company raised its 2026 capital expenditure guidance to $200 billion, up from $91 billion last year, which could make the stock volatile.
  • Alphabet's stock fell sharply following the second-quarter earnings report and still trades below pre-report levels as of Sept. 4.
Full Analysis
Billionaire Bill Ackman's hedge fund, Pershing Square, sold its entire stake in Alphabet (GOOGL) during the second quarter while initiating a position in Netflix. This move highlights a strategic shift away from Alphabet despite its strong recent financial performance, driven by concerns over near-term volatility related to aggressive artificial intelligence infrastructure spending. Alphabet reported robust revenue growth of 24% to $120 billion in the second quarter, marking the 12th consecutive quarter of double-digit expansion. However, the company posted negative free cash flow for the first time as a public entity and raised its 2026 capital expenditure guidance significantly to $200 billion from $91 billion last year, fueling debate over the sustainability of its AI investment pace. The article details Alphabet's strong position in Google Cloud, which grew 82% driven by demand for AI infrastructure and the sale of custom TPUs. Despite gaining market share and CEO Sundar Pichai reporting high adoption of Gemini APIs among Fortune 100 companies, Ackman's exit suggests investors are wary of the stock's potential volatility as bulls and bears weigh the heavy capex requirements against current cash flow generation. In contrast to Alphabet, Ackman is buying into Netflix, which has fallen 42% from its highs due to failed bidding wars for Warner Bros. Discovery and Roku. The article argues that while growth prospects are under scrutiny, Netflix remains a dominant streaming player with pricing power and an undervalued stock at 24.7 times earnings, offering a different risk-reward profile than the capital-intensive Alphabet.