Alphabet’s AI Missteps Are Opportunity For One Fund Manager

Concerns about Alphabet Inc.’s artificial intelligence missteps have weighed heavily on the Google-parent’s stock, but a Boston Partners fund manager believes this has created a golden opportunity for investors.

The shares trade at “a low multiple for an extraordinary business,” David Cohen, who manages just over $30 billion as a portfolio manager for Boston Partners’ large cap value strategy, said in an interview in London. “We don’t think the upside from what the company can do with AI is priced into the equity.”

Alphabet’s misfiring Gemini AI product has been viewed as a major setback for a firm known for its technological prowess, with the company last month pausing an image generation feature that drew criticism over inaccurate historical depictions of race. That sparked concerns that one of the world’s most valuable firms over the past decade is falling behind in AI, having been overtaken by Nvidia Corp. and Amazon.com Inc.

Cohen said the advantage for Alphabet — whose stock has dropped 5% this year compared with a 13% gain for the Bloomberg Magnificent 7 Index — is that its share price doesn’t reflect its capabilities in artificial intelligence. He believes the Gemini issues can be fixed relatively easily, and that this presents “a rare opportunity for fund managers looking for a value stock with massive growth potential.”

Typically considered a growth bet and not commonly found in so-called value portfolios, Alphabet was the fourth-biggest holding in Cohen’s Robeco BP US Large Cap Equities fund as of Jan. 31, according to the latest fact sheet. The fund, which also counts JPMorgan Chase & Co., Walmart Inc., and Berkshire Hathaway Inc. as its top holdings, has returned nearly 17% in the past year, compared with a 10% gain in the benchmark Russell 1000 Value Index, according to data compiled by Bloomberg.