This radar can be obtained by artificial intelligence (AI) company Alphabet. Here's why.

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Every quarter, institutional investors are required to file a 13F form with the Securities and Exchange Commission (SEC). This is a document that outlines all the stocks investors like hedge funds are buying and selling. This can be a useful tool to see where the smart money is moving.

Like hedge funds, corporations can also take positions in other companies. Internet search giant and artificial intelligence (AI) leader the alphabet has built a very impressive portfolio.

While parsing the company's 13F, there was one transaction in particular that stood out to me. So much so, that I think Alphabet has just identified its next acquisition candidate.

Let's explore which company Alphabet is aggressively investing in, and why an acquisition doesn't seem out of the question.

Alphabet's massive purchases during the first quarter

Most of Alphabet's holdings in public companies are in the healthcare and technology industries.

Some of Alphabet's biggest positions include a cyber security company. Crowd strikeWorkplace productivity software business UiPathas well as Treatment.

During the first quarter, Alphabet acquired 7.1 million shares of the software development platform. Git Lab (NASDAQ: GTLB ). GitLab is now Alphabet's largest public company position, and Alphabet is the largest institutional investor with a 7.4% ownership stake in GitLab.

Image source: Getty Images.

Why might Alphabet acquire GitLab?

One of the most common alternatives to GitLab is a similar business called GitHub.

Retrieved from GitHub Microsoft Back in 2018, the stock was worth about $7.5 billion. At the time of the deal, GitHub had a reported 28 million developers and was generating about $200 million to $300 million in annual recurring revenue.

Today, it is estimated that GitHub has 100 million users and generates $1 billion in revenue. According to Microsoft's latest earnings report, 90% of Fortune 100 companies use GitHub.

A major reason for this meteoric growth at GitHub is AI. The platform is playing a key role for Microsoft Copilot, the company's AI-powered workplace productivity tool and smart assistant.

Considering that Alphabet competes with Microsoft in the growth markets of cloud computing and software productivity platforms, it's not unreasonable to think that GitLab could end up as a core feature in the company's Gemini AI model. will go

Additionally, according to media outlets, Alphabet was considering acquiring GitHub but ultimately lost out to Microsoft.

Personally, I don't see GitLab's recent purchase of Alphabet as just an opportunity to strike a strategic partnership. Given Alphabet's rivalry with Microsoft, the fact that it failed to acquire GitHub, and GitHub's undeniable contribution to Microsoft's AI development, I'm guessing that Alphabet will continue to strengthen its relationship with GitLab in the coming months. will strengthen

Moreover, I think developers will start to see more functionality in Gemini promoting GitLab. If this proves to be successful, I think Alphabet may acquire GitLab sooner rather than later.

The bottom line for investors

It is important to keep in mind that the ideas explored in this article are my own opinions. I can't say for sure whether Alphabet is currently considering acquiring GitLab or another company.

For these reasons, I would caution against buying GitLab stock based on takeover speculation. Investments in GitLab should be rooted in belief around AI as well as the company's growth potential.

GTLB chart

So far this year, shares of GitLab have tumbled more than 30%. While the company has done a solid job in growing revenue, sustainable profitability remains an issue. In a way, these financial discrepancies further support my thesis of Alphabet acquiring GitLab.

With GitLab shares down, Alphabet may be able to complete the acquisition at an attractive price point while easily integrating GitLab's functionality into its ecosystem. At the same time, I think Alphabet can create some significant cost synergies and turn GitLab into a profitable operation.

However, I think investing in GitLab at this time isn't the smartest idea given the company's financial profile compared to larger, more established opportunities in the AI ​​field.

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Suzanne Frey, an Alphabet executive, is a member of The Motley Fool's board of directors. Adam Spotako holds positions at Alphabet and Microsoft. The Motley Fool has positions and recommends Alphabet, CrowdStrike, GitLab, Microsoft, and UIPath. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a Disclosure Policy.

Prediction: This radar could be acquired by artificial intelligence (AI) company Alphabet. Here's why. Originally published by The Motley Fool.

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