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The Nasdaq Composite Index saw an impressive 31% average annual return in bull markets since 1990.
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Meta Platforms leverages artificial intelligence to curate content that better resonates with social media users.
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As an Alphabet subsidiary, Google stands out as a major player in AI infrastructure and in the development of large-scale language models.
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Investors may want to keep an eye on Meta Platforms and Alphabet, as several hedge fund billionaires have added these stocks to their portfolios recently.
The Nasdaq Composite recently entered a new bull market earlier this year, with a historical average return of 31% annually during previous bull phases since 1990. This could indicate promising growth potential for 2026 and beyond. Notably, investments in Meta Platforms and Alphabet (Google) are gaining traction among hedge fund billionaires in the third quarter.
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Stanley Druckenmiller, from Duquesne Family Office, acquired 76,100 shares of Meta Platforms along with 102,200 shares of Alphabet, which together represent about 2% of his portfolio.
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Israel Englander of Millennium Management purchased 793,500 shares of Meta and 2.2 million shares of Alphabet, marking them as his eighth and fifth largest holdings, respectively.
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Ken Griffin, representing Citadel Advisors, bought 1.4 million shares of Meta Platforms, positioning it as his fourth-largest holding, while his Alphabet shares also increased to 2.5 million, albeit still a small stake.
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Philippe Laffont of Coatue Management acquired 355,000 shares of Meta and 7.3 million shares of Alphabet, making these his largest and third-largest holdings, respectively.
Here’s the essential takeaway for investors.
Meta Platforms controls three of the top four social media networks based on monthly user activity. This massive reach provides businesses insight into consumer preferences, allowing for tailored content and targeted advertising. Such capabilities play a crucial role in establishing Meta as the second-largest company in the advertising tech arena.
According to Malik Ahmed Khan from Morning Star, the company is positioning itself as a “digital advertising giant” with a focus on expansion. This confidence stems not only from Meta’s strong presence in social media but also from its significant investments in AI. The company has developed custom AI chips and proprietary language models to enhance content recommendations, and the results are becoming apparent.
During a recent earnings call, CEO Mark Zuckerberg indicated that their AI recommendation system is yielding better and more relevant content. Notably, user engagement showed notable increases: time spent on Facebook jumped by 5%, Threads by 10%, and Instagram video interactions by 30%. Zuckerberg emphasized that improvements to their AI ranking system are primarily driving the robust performance of their advertising business.
In the third quarter, Meta reported a 26% increase in revenue, reaching $51 billion, with GAAP net income climbing 20% to $7.25 per diluted share. However, the company forecasted a “significantly larger” capital investment for 2026, causing its stock price to drop sharply after the announcement. Wall Street anticipates a 17% revenue growth annually over the next three years, aligning with estimates that advertising tech spending will rise 14% annually through 2030. Currently, the company’s valuation at 30 times earnings seems reasonable, especially since its stock remains 15% below its all-time high, presenting a potential buying opportunity.
Alphabet, the largest ad tech company globally, excels in engaging users and gathering data through platforms like Google Search and YouTube. Although the emergence of generative AI tools like ChatGPT poses risks to its search advertising revenue, Alphabet has implemented adaptations such as AI Overview and AI Mode.
Additionally, Alphabet has rolled out new advertising features, including AI Max for search campaigns, which provide enhanced targeting and creativity for brands seeking new customers. While research firm Gartner forecasts a 50% reduction in organic search traffic by 2028, Alphabet is expected to maintain its leadership in digital advertising.
Google Cloud ranks as the third-largest public cloud for infrastructure and platform spending, gaining two percentage points in market share in the last two years, largely due to its AI capabilities. Recently, Gartner acknowledged Google as the leading cloud platform for AI application development, and Forrester Research recognized its strides in large-scale language models.
In a recent financial disclosure, Alphabet exceeded revenue and earnings expectations with a 16% sales increase, reaching $102 billion, an acceleration compared to the previous year. GAAP earnings rose 35% to $2.87 per diluted share. CFO Anat Ashkenazi noted robust demand for AI infrastructure, particularly custom chips and Gemini models.
Although Alphabet’s stock has surged 70% since the beginning of the year, making its valuation look less appealing than before, forecasts suggest that earnings will grow at 16% annually for the next three years, making its current price-to-earnings ratio of 32 times reasonable. Thus, investors might consider establishing a small position now.
Before investing in Meta Platforms, investors should note the following:
According to the Motley Fool Stock Advisor, a team of analysts has identified ten stocks that they believe might outperform the Meta platform. These options may present opportunities for noteworthy returns in the coming years.
Reflecting on historical performance, if someone had invested $1,000 in Netflix on the recommendation from December 17, 2004, it would be valued at approximately $540,587 now. Similarly, a $1,000 investment in Nvidia following the recommendation from April 15, 2005, would be worth about $1,118,210 today.
The average return of the Stock Advisor is 991%, which is a stark contrast to the S&P 500’s 195%—demonstrating substantial market outperformance. It might be worth considering joining an investing community tailored for retail investors to stay informed.
