'One of the best valuations for AI': Buy the dip in this Big Tech stock, strategist says

Published Mon, Jan 8 20246:18 PM EST

Nvidia has been an investor favorite when it comes to artificial intelligence. But other tech companies have also been busy building up their capabilities in the area — and one of them has been underappreciated by the market, according to one strategist. That's Alphabet , said Matt Orton, chief market strategist at Raymond James Investment Management, who calls it one of his top picks for 2024. "This is more of the institutional play and it's underappreciated, I think, by the broader market," he told CNBC's " Street Signs Asia " on Monday. Orton pointed to the launch of Gemini, what Alphabet called its largest and "most capable" AI model . Companies can use it for more advanced customer service engagement, and to identify trends to advertise products. Gemini could also be used for content creation and productivity apps. Orton called it a "game changer." "I still view this as one of the best plays in the internet space and one of the best valuations for AI as Gemini tightens the GenAI gap," he told CNBC. He cited the strength of the U.S. consumer as one factor that will speed up advertising revenue for Alphabet. "So I think when you align both of those, we continue to see the ability for earnings growth and for expanding margins, and the fact that it's trading at a really attractive valuation still, especially relative to some of the other Magnificent Seven," said Orton. "It's a really, really good setup." He stressed that he "wouldn't be chasing the stock" but would buy it if there's further downside from here. "But if you do get downside, if you see more weakness from what we had in the first half of the year, continue building a position because this is a high quality name with a fortress balance sheet," he said. Alphabet is one of the Magnificent Seven stocks, which as a group contributed to gains that pushed the S & P 500 up 24% in 2023. But the stock dipped recently, losing 0.88% in the past month and 2.8% since the beginning of the year. Analysts covering Alphabet gave it a 83% buy rating and a potential 13.9% upside from an average price target of $154.62, according to FactSet.