Stacy Rasgon Says Companies Like Alphabet (GOOG) Already Getting Returns on AI Investment - 'They're Not Idiots'

We recently published Top 10 Trending Stocks Everyone’s Watching in Q4. Alphabet Inc. (NASDAQ:GOOG) is one of the trending stocks everyone's watching.

Stacy Rasgon, Bernstein U.S. semiconductor managing director and senior analyst, was recently asked on CNBC about his thoughts on concerns of an AI bubble. The analyst said he remains on the bullish side of the AI trade and explained that companies are already starting to see returns on their investments. Rasgon gave the example of Alphabet during the discussion:

“You have to remember the folks that are building this stuff out. And this is one other difference maybe from say 2021. The companies that are doing the bulk of the spending are some of the most well-funded and most profitable businesses that humanity has ever developed. And they’re not idiots, right? And they can see things that we can’t. And they’ve also got other businesses that they’re running this stuff through that they’re already getting returns on. Google’s getting returns on the stuff that is getting returns.”

Alphabet is in a strong position to develop an AI ecosystem around search and Cloud. Businesses around the world are migrating to Google Cloud. Alphabet’s cloud margin rose to 20.7% in the second quarter from 11% last year. Google Cloud chief said earlier this year that the business has a backlog of $106 billion, and it’s “growing faster than our revenue.” According to data from SimilarWeb, ChatGPT's market share in AI chatbot traffic is shrinking despite being a leader. Gemini, on the other hand, is growing fast and has quadrupled its market share in the last six months.

Oakmark Equity and Income Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its third quarter 2025 investor letter:

“Alphabet Inc. (NASDAQ:GOOG) was the top contributor during the quarter. The technology conglomerate’s stock price appreciated following a favorable ruling in the Google Search antitrust case and second-quarter earnings that exceeded expectations across the board. Innovations in the Google Search experience are driving both engagement and revenue benefits. Moreover, Cloud growth is accelerating thanks to robust demand for AI workloads. We continue to believe Alphabet is undervalued on a sum-of-the parts basis and see potential for the company’s AI leadership to drive further upside across the portfolio.”

While we acknowledge the potential of GOOG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.