The Nasdaq Composite (^IXIC +0.31%) entered a new bull market earlier this year. Since 1990, the index has been through six other bull markets, and it returned an average of 31% annually. That hints at substantial gains in 2026 and beyond. Investors should consider Meta Platforms (META +1.80%) and Alphabet (GOOGL +1.09%) (GOOG +1.16%), two Nasdaq stocks that several hedge fund billionaires bought in the third quarter.
- Stanley Druckenmiller of Duquesne Family Office bought 76,100 shares of Meta Platforms and 102,200 shares of Alphabet. They collectively account for 2% of his portfolio.
- Israel Englander of Millennium Management purchased 793,500 shares of Meta Platforms and 2.2 million shares of Alphabet. They are now his eighth- and fifth-largest holdings, respectively, excluding options.
- Ken Griffin of Citadel Advisors bought 1.4 million shares of Meta Platforms, now his fourth-largest holding excluding options. He also added 2.5 million shares of Alphabet, though it remains a relatively small position.
- Philippe Laffont of Coatue Management purchased 355,000 shares of Meta Platforms and 7.3 million shares of Alphabet. They are now his largest and third-largest holdings, respectively.
Here's what investors should know.
Image source: Getty Images.
1. Meta Platforms
Meta Platforms owns three of the four most popular social media networks as measured by monthly active users. Those web properties afford the company insight into consumer likes and dislikes that inform content suggestions and advertising. The ability to engage internet users on such a vast scale has made Meta the second-largest ad tech company.
Malik Ahmed Khan at Morningstar recently wrote, "Meta is a digital advertising juggernaut poised to increase its market share." His confidence is partly due to its dominance in social media, but also to its investments in artificial intelligence (AI). Meta has designed custom AI chips and proprietary large language models to improve content recommendations, and its efforts are paying off.
On the third-quarter earnings call, CEO Mark Zuckerberg said, "Our AI recommendation systems are delivering higher quality and more relevant content." Time spent on Facebook increased 5%, time spent on Threads increased 10%, and engagement time with Instagram videos increased 30%. "Our ads business continues to perform very well, largely due to improvements in our AI ranking systems as well," Zuckerberg added.
Meta reported encouraging financial results in the third quarter. Revenue increased 26% to $51 billion and GAAP net income (excluding a one-time tax charge) increased 20% to $7.25 per diluted share. But the stock fell sharply following the report because the company said capital expenditures will be "notably larger" in 2026.
Wall Street expects Meta's earnings to increase at 17% annually over the next three years, a reasonable estimate given that Grand View Research estimates ad tech spending will grow at 14% annually through 2030. That makes the current valuation of 30 times earnings look tolerable. With the stock still 15% below its record high, now is a good time to buy.
2. Alphabet
Alphabet is the largest ad tech company in the world because of its ability to engage internet users and source data through Google Search and YouTube. While the growing popularity of generative AI tools like ChatGPT is a clear threat to its search advertising business, the company has adapted with features like AI Overviews and AI Mode.
Alphabet has also introduced new advertising tools like AI Max for search campaigns, a suite of targeting and creative features that help brands find new customers. It leans on AI to create ads, customize marketing copy, and direct users to the most appropriate landing page. Research company Gartner expects organic search traffic to fall 50% by 2028, but Alphabet should maintain its dominance in digital advertising.
Meanwhile, Alphabet's Google Cloud is the third-largest public cloud by infrastructure and platform services spending, and it gained 2 percentage points of market share in the past two years largely because of AI expertise. Gartner recently ranked Google as the most capable cloud platform for AI application development, and Forrester Research has recognized its leadership in large language models.
Alphabet reported encouraging third-quarter financial results, beating estimates on the top and bottom lines. Revenue increased 16% to $102 billion, an acceleration from 15% growth in the same period last year. GAAP earnings increased 35% to $2.87 per diluted share. CFO Anat Ashkenazi highlighted strong demand for AI infrastructure, particularly custom chips and Gemini models.
Alphabet shares have advanced 70% year to date, making the valuation less attractive than it was a few months ago. However, Wall Street expects the company's earnings to increase at 16% annually over the next three years, which makes the current valuation of 32 times earnings tolerable. Investors should consider buying a small position today.
