We are starting a position in former Club holding Alphabet , buying 95 shares at roughly $313. GOOGL will have a roughly 0.76% weighting in the portfolio. We’ve beaten ourselves up plenty over the exit of our long-held position in Alphabet earlier this year. At the time, Jim admitted to being “torn” on the stock — worried its Google search business was being cannibalized by Gemini and hurt by Grok and ChatGPT, even as YouTube and Waymo were doing well. We determined that Alphabet was late to the generative AI party and at risk of losing its dominant search market share as users turned to large language models (LLMs) like OpenAI’s ChatGPT to find information online. Even as Google’s Gemini chatbot began to improve, following a botched release, it was still unclear whether that would help fortify search or cannibalize it. Alphabet wasn’t leading the AI race; it was falling back. On top of all that, Alphabet itself was under relentless attack from the Department of Justice (DOJ), which was pushing for a breakup. In addition to calling for a spin-off of its Chrome browser, the DOJ sought to block Alphabet’s pay-for-play arrangement with Club name Apple , under which Alphabet pays the iPhone maker a substantial sum for priority placement of Google Search within Apple’s Safari browser. The risk posed by the potential prohibition of that longstanding arrangement was heightened by Apple’s clear pursuit of a third-party LLM leader to enhance Siri, which has been viewed as a disappointment following the lackluster rollout of Apple Intelligence. As a result, we decided to exit the smallest “Magnificent Seven” position in the portfolio. While we booked a gain of more than 100% on the sale, we missed out on another double this year. However, we can’t let a bad call cloud our future thinking. Facts change, and we reconsider our investment theses. Since our exit, Google launched Gemini 3 — which, in addition to instantly becoming the new standard for all other LLMs to beat, was developed and runs entirely on custom silicon designed by Google, in partnership with Club holding Broadcom . The new lower-cost silicon should also help drive margin expansion. The market also began to appreciate that the custom silicon used to run the model with extreme efficiency could represent a new revenue stream, with Google seeing increased interest in the chips from other companies. In addition, the courts ruled in Alphabet’s favor, stating that it did not need to spin off Chrome and that the long-term, mutually beneficial partnership between Google and Apple could continue. It was vital, given Apple’s clear intention to leverage third-party technology for its highly anticipated Siri AI upgrade, which goes beyond a chatbot that answers complex queries to a full-blown conversational digital assistant. Cramer has said that Google would likely be a better AI partner for Apple’s new Siri, given the existing search arrangement. Toss in that Gemini is undervalued in the market — OpenAI is approaching a whopping $1 trillion valuation, based on the numbers being discussed in its latest funding round — and we believe there’s plenty more upside ahead. We are initiating Alphabet with a buy-equivalent 1 rating and a $350 price target. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
We’re adding an AI giant to the portfolio, recognizing things have changed
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