Dan Niles, founder of Niles Investment Management, says he still likes Alphabet and Meta Platforms. He cites Google Cloud growth above 80% and Metas Muse AI agent as Nvidia nears a $6 trillion valuation.
Nvidia set a record high on October 2, which shows how much investors will pay for AI chips. The harder question is who earns a return on the AI spending behind them.
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Why Does Dan Niles Still Like Meta After the Rally？
Niles first flagged Meta on September 7, when the stock was down about 7% year to date, he said.
Meta has had a recent spike in its stock price. Image Source: Trading View
Meta launched Muse, an agent that browses the web and completes tasks for users, on September 8. Niles says the app now ranks above ChatGPT on the App Store.
Google, Microsoft, and Amazon already rent out AI computing power through public clouds. Meta, however, does not, and Niles sees a cloud arm as its next way to monetize AI spending.
He likes the stock less than in September after the run-up. Even so, he still sees momentum, and JPMorgans Meta price target rose to $920 from $820 last month.
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Can Google Cloud Growth Outweigh the Search Worries？
Alphabet reported on July 22 that Google Cloud revenue rose 82% to $24.8 billion in the second quarter. Niles called it the fastest acceleration among Google, Microsoft, and Amazon.
Meanwhile, Google Search and other revenue rose 17% to $63.3 billion in the same quarter, despite AI disruption fears.
Still, Niles flagged one gap. Google has no competing agent yet, he said, while OpenAI has launched its Dots agent.
On search, he said investors should keep checking the data.
“You got to watch the numbers and make sure theres not some issue with search.”
Dan Niles, founder and portfolio manager of Niles Investment Management, interview
Alphabet‘s cloud backlog, meaning signed customer commitments not yet booked as revenue, reached $514 billion in June. Together with Muse’s App Store climb, it tests whether customers will pay for the AI running on those chips.