What happened
Shares of search and cloud giant Alphabet (GOOG +0.50%) (GOOGL +0.65%) rose 14.5% in May, according to data from S&P Global Market Intelligence.
The Google parent unveiled many new technologies during its I/O conference early in the month. And just after that, 13F filings released midmonth revealed that a bunch of high-profile hedge funds had bought or added to their stakes in Alphabet during the first quarter.
NASDAQ: GOOG
Key Data Points
So what
Alphabet had been a relative laggard during the first quarter compared with some of its big-tech brethren, as investors feared that generative AI could disrupt the conglomerate's core search business. However, Alphabet appeared to put at least some concerns to rest in a high-profile company event.
Alphabet held its annual I/O conference for developers in early May, where management unveiled some new technology. Of note, CEO Sundar Pichai said, "With generative AI, we are taking the next step. With a bold and responsible approach, we are reimagining all our core products, including search."
Management explained how the company is using AI to enhance all of its products, from Google Workspace to Google Maps, Google Photos, and, yes, Search. In addition, Pichai highlighted Alphabet's PaLM2 large language model, the latest iteration that would be used to improve Bard, Alphabet's ChatGPT competitor.
Bard had gotten off to an inauspicious start, making a mistake in its public unveiling back in February. However, it appeared the update from management on a new and improved model put those fears to rest for the time being.
Later in the month, Alphabet got another jolt of confidence after several hedge funds released their purchases from the first quarter. Alphabet, it turns out, received a lot of interest, with buys from high-profile money managers David Tepper, Seth Klarman, and Steve Cohen. On top of those, Bill Ackman's Pershing Square Holdings (PSHZ.F 1.83%) disclosed it had made Alphabet a very large position in its concentrated portfolio, at over 10% of Pershing's long portfolio.
The vote of confidence from not one but several well-respected value investors helped propel Alphabet even higher in May.
Now what
The artificial intelligence mania we are seeing has divided investors as to whether the surge in AI-related stocks is the real deal or mere hype and has also sparked debate as to who the relative winners and losers will be.
While much is to be determined, Alphabet has been a pioneer in this field, as its engineers basically invented the concept of transformer engines in 2017, which allow an AI to "self-train" without a human labeling all the data.
So, I wouldn't count Alphabet out in this race, and the market appears to be giving it a new look after the skepticism from earlier in the year.
