Companies like Alphabet (GOOG +0.99%)(GOOGL +1.08%) are so big with so many different business lines, and such strong earnings and free cash flow, that it is not uncommon for them to start investing in publicly traded companies with their own capital.
At the end of the second quarter, Alphabet had amassed an equities portfolio with 36 stocks valued at over $2.1 billion. Over the last four quarters, the company has dumped its position in the cybersecurity company CrowdStrike (CRWD 0.65%) and piled into a supercharged space stock instead that has crushed the market this year.
Let's consider why Alphabet may have made these moves -- and what investors can learn that might help them with their own portfolios.
Image source: Getty Images.
Exiting CrowdStrike, a longtime holding
Alphabet first invested in CrowdStrike through its independent growth fund called CapitalG, which has $7 billion in assets under management and has invested in 27 companies that have exited through an initial public offering or acquisition.
Alphabet had been involved in CrowdStrike for a long time, having invested in the company's Series C round in 2015. CrowdStrike went public in 2019 and the stock has done extremely well, up over 700% since then. So it's possible that Alphabet simply took gains after a strong run by the cybersecurity company.
CrowdStrike offers a range of capabilities that also leverage artificial intelligence (AI), which is part of what has captivated investors. These include generative AI-powered solutions that can detect cyber threats, as well as solutions to help companies running AI applications. For instance, the AI chip king Nvidia directly embeds CrowdStrike's Falcon Cloud Security platform into its infrastructure to protect large language models from development to deployment across hybrid and multi-cloud environments.
NASDAQ: CRWD
Key Data Points
Between fiscal 2024 and 2025, CrowdStrike grew revenue by close to 30%. Revenue growth has remained steady in recent quarters, but investors have been disappointed by management's forward guidance.
Furthermore, the company has also experienced growing losses in recent quarters because it is still dealing with costs associated with a major tech outage in 2024. A faulty software update led to outages on millions of Windows systems, and is considered one of the largest outages in history. CrowdStrike is expected to incur a total of $5.4 billion in charges related to the outage.
Another reason Alphabet may have bailed on CrowdStrike is due to its $32 billion acquisition of a rival security cloud platform called Wiz that the tech conglomerate plans to integrate with Google Cloud. Trading at 140 times forward earnings and having provided lackluster guidance, investors may want to take a breather on CrowdStrike for now.
Piling into this supercharged space stock
In late 2024, Alphabet initiated a new position of over 8.9 million shares in the satellite space company AST SpaceMobile (ASTS +2.88%). The upstart company is currently building a cellular broadband network in space to close connectivity gaps and eventually bring uninterrupted 5G wireless service to everyone on the planet. AST plans to do this by building a network of satellites in space that can directly connect to phones on the ground.
AST SpaceMobile doesn't currently generate much revenue but hopes to launch between 45 to 60 satellites in space by next year to provide key coverage in large markets like the U.S., Europe, and Japan, among other countries. The market seems to believe in AST and the stock has risen over 234% this year to nearly a $26 billion market cap.
NASDAQ: ASTS
Key Data Points
Of course, stocks like AST always come with inherent risk because they have very little revenue, now trade at a large market value, and need to obtain many regulatory approvals from different countries. The company has made progress on the regulatory front and received conditional approval from the U.S. Federal Communication Commission to launch 20 satellites. If and when the company receives full FCC approval, another challenge will present itself in transporting all of the satellites into space. There's also competition from Elon Musk's SpaceX.
So, while the use case of AST's network carries tremendous potential, the company still has a lot to execute on. Google appears to have investments in AST through common shares mentioned above and a strategic investment through an interest-paying debt instrument. It makes sense that Alphabet would be interested in a company like this because the more people that have internet connection, the more people that can use the company's products and services from its search engine to its content platform YouTube.
Given the nature of the company, I think investors can buy the stock, but should probably keep it in the speculative part of their portfolios for now.
