The everyday investor can find solid ideas by following the experts closely. Bill Ackman, the billionaire founder of the hedge fund Pershing Square Capital Management, is one such professional. He has a strategy similar to Warren Buffett's: identify high-quality businesses and make concentrated bets on  them.

As of March 31, Pershing Square had 14% of its $12 billion portfolio in this top artificial intelligence (AI) stock, making it the third largest holding. Shares have soared 143% in the past five years. Continue reading to learn about this dominant business.

ai robots holding chart going up and right.

Image source: Getty Images.

Already a leader in AI

The world might have been discovering AI in the past couple of years, but Alphabet (GOOGL -0.01%) (GOOG 0.06%) has been working on AI for more than a decade. These days, the revolutionary technology permeates the company's products and services. It helps to provide traffic info in its Maps, allows users to find pictures in Photos by searching on what's in them, and filters spam in Gmail.

Alphabet held its annual Google I/O developer conference recently, and it provided some exciting news about numerous features and tools on the AI front. Of note is Gemini Agent Mode, which allows users to delegate complex tasks to AI that might involve many different steps, like searching the web or conducting deep research.

The company also announced it has partnered with Warby Parker to develop AI smart glasses. This might come as a surprise, given that Google Glass was a failed product launch a decade ago.

It's clear that Alphabet aims to position itself as a dominant force in what appears to be the next stage of the internet's evolution. AI isn't just a passing fad for the company -- it's part of the DNA at Alphabet.

And for the critics worried about how AI will affect Alphabet's ability to generate revenue, ad sales in the first quarter rose 8% year over year. It was also announced that ads will be displayed within AI Overviews and in AI Mode -- an example of Alphabet adapting to the times.

Operating from a position of strength

Ackman certainly appreciates Alphabet's position in the AI race. That competitive standing is bolstered by the presence of an economic moat that stems from a powerful network effect, meaning that a product or service gets better as more people use it.

Google Search is one example. More search queries help refine the algorithm, providing more relevant info that leads to greater use. And for YouTube, more viewership incentivizes creators to post more videos. With more content on the site, there is a more diverse range of videos to watch, which brings on more viewers.

Alphabet's financial position makes it one of the world's most lucrative enterprises. It generated $35 billion in net income and $19 billion in free cash flow just in the first quarter. And as of March 31, the business had $95 billion in cash, cash equivalents, and marketable securities on its balance sheet, giving it deep pockets to keep investing aggressively in AI.

Investors shouldn't overthink this one

Currently, Alphabet shares are down about 9% so far this year, trading 17% below their peak, which was reached in February. This is despite the company reporting strong financial results. It exceeded Wall Street expectations for revenue and earnings per share in the first quarter.

The stock trades at an attractive valuation right now. Investors can add Alphabet to their portfolios at a price-to-earnings ratio of 19.2. This isn't far off the cheapest multiple it has sold for in the past decade. In my view, investors should keep things simple. Consider following Ackman and buy Alphabet stock today.