An investor letter highlighted why Alphabet’s mix of search, cloud and venture-stage bets still fits a value-oriented thesis, even as markets favor AI momentum stocks and capital spending rises.
Hotchkis & Wiley said Alphabet fits its investment thesis and remains attractively valued despite being underweight versus the benchmark, which hurt relative returns in Q2 2026.
Alphabet’s business mix: dominant Search advertising, an enterprise cloud business, and venture-stage units grouped as "Other Bets."
Alphabet's structure and why it matters
Alphabet is a holding company whose main operating unit is Google. Google's Search business remains the primary cash generator through advertising. Separately, Alphabet runs an enterprise cloud division and a set of venture-stage businesses reported together as "Other Bets." The letter describes these parts together when assessing valuation and growth prospects.
Why Hotchkis & Wiley stayed invested
The fund said Alphabet's valuation "remain good" and that growth prospects are improving. Even though the stock rose during the quarter, Hotchkis & Wiley's underweight position relative to the benchmark reduced the fund's relative performance for Q2 2026. The manager explicitly stated its investment thesis for Alphabet is intact, which explains why they did not add to the position despite the underweight drag.
Short-term market performance and positioning
Reported market data as of September 1, 2026: Alphabet closed at $335.02 per share. The article notes the stock had declined about 7.56% over the prior month but was up roughly 45.24% over the preceding year. Market capitalization was reported at $4.09 trillion. Hedge fund holdings rose slightly, with 275 portfolios holding Alphabet at the end of Q2 2026 versus 265 the prior quarter.
The market's rotation into AI-related names and high-beta stocks has driven some speculative behavior and pushed multiples higher in parts of the market. That environment has produced two reactions relevant to Alphabet:
Related signals mentioned in coverage
Separate articles and coverage referenced alongside the letter point to large infrastructure and AI-related capital spending by Alphabet and notable institutional interest. One item notes Berkshire Hathaway increased its stake in Alphabet, making it one of the company's larger shareholders. Other coverage highlights sizable capital expenditure plans focused on data centers and AI infrastructure, and commentary about Alphabet's AI reach into user products and advertising.
What this means for investors reading the letter
The Hotchkis & Wiley note is a reaffirmation of a valuation-based view: Alphabet is a diversified tech holding with a dominant ad franchise, a growing enterprise cloud business, and speculative long-term bets. That mix can fit both growth and value frameworks, depending on which parts of the business investors prioritize. The fund's underweight position that reduced relative returns shows a trade-off between conviction in long-term thesis and short-term benchmark-relative performance.
Hotchkis & Wiley continues to treat Alphabet as a core holding consistent with its investment criteria. Market dynamics—heavy investor interest in AI, rising capex for infrastructure, and active repositioning by other large investors—are the backdrop, but the fund's stated view is that Alphabet's valuation and growth outlook justify maintaining the position.
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