Key Points
- In the second quarter, Bill Ackman's hedge fund sold its entire stake in Alphabet and started a position in Netflix.
- Alphabet is spending aggressively on artificial intelligence infrastructure, which could make the stock volatile in the near term.
- Netflix is down 42% from its high because investors are worried about its growth prospects, but the stock is too cheap to ignore.
- 10 stocks we like better than Alphabet ›
Billionaire Bill Ackman runs Pershing Square, one of the 20 most successful hedge funds in the world as measured by net gains since inception, according to LCH Investments. That makes him a good source of inspiration for individual investors
Ackman made a number of trades in the second quarter, but the two listed below warrant closer inspection:
- Ackman sold his stake in Alphabet( GOOGL-1.11%)( GOOG-1.05%), an AI stock up 100% in 18 months.
- Ackman started a position in Netflix( NFLX-5.35%), a mega-cap stock down 42% from its record high.
Here's what investors should know about Alphabet and Netflix.
Bill Ackman speaks at an event for the Pershing Square Sohn Cancer Research Alliance. Image source: Getty Images.
Alphabet: The stock Bill Ackman sold
Alphabet reported strong financial results in the second quarter despite missing estimates on the bottom line. Revenue rose 24% to $120 billion, marking the 12th consecutive quarter of double-digit growth. Meanwhile, GAAP operating income (which eliminates unrealized gains from its investment in SpaceX) increased 31% to $41 billion.
Alphabet is primarily a digital advertising company supported by a plethora of popular web properties, such as Google Search and YouTube. Advertising products and services still account for more than two-thirds of total revenue, but cloud computing has become an increasingly consequential part of the big picture.
Google Cloud revenue rose 82% in the second quarter, the fifth consecutive acceleration, driven by strong demand for artificial intelligence (AI) infrastructure. For the first time, the company earned revenue by selling custom AI accelerators called tensor processing units (TPUs) to external customers, representing an attempt to compete more directly with the market leader Nvidia.
Meanwhile, CEO Sundar Pichai said Gemini APIs (i.e., interfaces that let outside companies integrate Gemini models into their own applications) now process about 22 billion tokens per minute, up from 16 billion one quarter earlier. Pichai also said 90% of Fortune 100 companies use Gemini Enterprise, an AI platform for business work.
Where to invest $1,000 right now
When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 978% — a market-crushing outperformance compared to 213% for the S&P 500.
They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.
"Stock Advisor" returns as of September 7, 2026.
In total, Google gained two percentage points of market share in cloud infrastructure and platform services in the past year, and custom chips and proprietary models could certainly drive further share gains in the future. Google Cloud is running circles around its two largest rivals, Amazon and Microsoft, which reported cloud revenue growth of 37% and 43%, respectively, in the most recent quarter.
So, why did Bill Ackman sell his shares? While Alphabet is well-positioned for long-term growth, it faces near-term headwinds related to AI infrastructure spending. In the second quarter, Alphabet reported negative free cash flow for the first time as a public company. It also raised its 2026 capex guidance to $200 billion, up from $91 billion last year.
Negative free cash flow could make the stock volatile as bulls and bears squabble about whether the company is spending too much money on AI infrastructure. Indeed, the stock fell sharply following the second-quarter earnings report, and still trades 2% below the pre-report level as of Sept. 4.
Netflix: The stock Bill Ackman bought
The streaming industry has become much more crowded over the last decade, but Netflix is still the dominant player by virtually every important metric. It has more monthly active users, generates more revenue, boasts better retention rates, and accounts for a larger percentage of TV viewing time than any other subscription streaming service.
In turn, Netflix has a data advantage. With deep insight into viewing behavior, the company has an edge when personalizing content and making production decisions. Indeed, Netflix consistently produces more engaging content than its rivals. Among the 10 most-watched original streaming series and movies in the final week of August, Netflix made four of the series and six of the movies.
Netflix is down 42% from its high in June 2025, primarily because the market is worried about the company's growth prospects after it failed to win bidding wars for Warner Bros. Discovery and Roku. However, I think the market is underestimating Netflix. The company has pricing power in the streaming space, a market forecast to grow at 10% annually through 2030, and it has largely untapped opportunities in advertising, live sports, and theatrical releases.
Wall Street estimates Netflix's earnings will increase at 21% annually over the next three years. That makes the current valuation of 24.7 times earnings look cheap. Indeed, most analysts view the stock as undervalued. Netflix has a median target price of $94 per share, which implies 20% upside from the current share price of $78. Patient investors should feel comfortable buying a small position today.
Should you buy stock in Alphabet right now?
Before you buy stock in Alphabet, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alphabet wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $421,997!" **Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,413,876!"](https://api.fool.com/infotron/infotrack/click?apikey=35527423-a535-4519-a07f-20014582e03e&impression=290c40fe-32ce-4077-b970-ee800164bb57&url=https%3A%2F%2Fwww.fool.com%2Fmms%2Fmark%2Fe-sa-bbn-bn%3Faid%3D8867%26source%3Disaeditxt0001155%26ftm_cam%3Dsa-bbn-evergreen%26ftm_veh%3Darticle_pitch%26ftm_pit%3D18365)
Now, it’s worth noting Stock Advisor’s total average return is 978% — a market-crushing outperformance compared to 213% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
"Stock Advisor" returns as of September 7, 2026.
Read Next
Sep 7, 2026•By Adam Spatacco
Sep 7, 2026•By Adria Cimino
This is the Best Bargain in the “Magnificent Seven” Right Now
Sep 6, 2026•By Lyle Daly
The Largest Communications Services Companies by Market Cap in September 2026
Sep 6, 2026•By Bram Berkowitz
Will Alphabet Break Warren Buffett's Cardinal Rule of Investing?
Sep 5, 2026•By James Brumley
Sep 5, 2026•By Keithen Drury
Amazon, Alphabet, and Microsoft: Two I'm Buying and One I'm Selling
About the Author
Trevor Jennewine is a contributing Motley Fool stock market analyst covering technology, cryptocurrency, and investment planning. Prior to The Motley Fool, Trevor managed several pharmacies. He holds a doctor of pharmacy degree from Oregon State University, a master’s degree in business administration from Miami University, and a bachelor’s degree in biology from Miami University.
Motley Fool issues A.I. buy alert
This tech could reach $80 trillion. Imagine a technology worth over 15 Nvidias.
What in the world could be worth 15 Nvidias? The answer is a radical tech breakthrough that our experts think is transforming every walk of life. And this giant leap forward has many on Wall Street very excited.
Stocks Mentioned
[
Alphabet
NASDAQ: GOOGL
$338.46
(-1.11%)-$3.80](https://www.fool.com/quote/nasdaq/googl/)
[
Alphabet
NASDAQ: GOOG
$335.31
(-1.05%)-$3.55](https://www.fool.com/quote/nasdaq/goog/) [
Netflix
NASDAQ: NFLX
$78.25
(-5.35%)-$4.42](https://www.fool.com/quote/nasdaq/nflx/)
Premium Investing Services
Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.
Labor Day Sale!×
×
⚡ EXCLUSIVE LABOR DAY SALE ⚡
3 years of Stock Advisor for just $5.53* a month!
PLUS: THE 5 "LIGHTNING ROD" STOCKS REPORT
They’re famous. They’re making big moves. But our analysts currently rate only one of them as a “Buy.”
Exclusive special report: reserved only for new members who claim this offer today.
- ⚡ Unlock 67% off* your first three years (Save $398!)
- ⚡ Get 2 new stock recs monthly and full access to Top 10 Stocks to Buy Now
- ⚡ Stock Advisor returns have historically crushed the S&P 500 by nearly 5x!
⏱ ENDS LABOR DAY!
- $199 for three years is a promotional price for new members only. 67% discount based on the current list price of Stock Advisor of $199/yr. Membership will renew annually at the then-current list price. Offer expires on September 7, 2026, at 11:59 pm PST.
**Stock Advisor returns as of September 7, 2026.
