How Philippe Laffont Reversed His Alphabet Stance: The AI Reckoning That Changed Everything

The tech investment landscape shifted unexpectedly in recent months when Coatue Management, the influential fund steered by billionaire investor Philippe Laffont, underwent a dramatic reassessment of one of the world’s largest technology companies. What started as skepticism about Alphabet’s ability to compete in the generative AI era culminated in a significant upgrade that placed the search giant among the fund’s top investment opportunities for the coming years. This reversal tells a compelling story about how initial concerns can evolve when new evidence emerges.

The Initial Concern: AI Chatbots as a Search Disruption

During a summer 2024 presentation, Laffont’s team unveiled the Coatue Fantastic 40 — a curated list of forty companies positioned to drive growth over the next five years. The investment framework heavily emphasized artificial intelligence as a transformative force, yet Alphabet conspicuously absent from the roster despite Coatue already owning shares in the company.

The reasoning behind this exclusion became apparent through one of the fund’s most compelling research findings. Philippe Laffont’s team presented data showing that paid ChatGPT adoption since 2022 had accelerated dramatically, with a particularly pronounced inflection point emerging in early 2025 as reasoning models demonstrated significant leaps in AI capability. But here’s where the analysis became sobering: when individuals subscribed to ChatGPT’s paid tier, their Google page views declined by approximately 8% per year — a stark reversal from Google’s typical 4% annual growth trajectory.

This observation wasn’t unique to Coatue. Apple’s head of services Eddy Cue acknowledged in testimony that Safari web browser search volumes had softened earlier in 2025. The implication was clear: AI chatbots posed a legitimate threat to traditional search, and Google’s historical dominance appeared vulnerable.

The Catalyst: When the Headwinds Shifted Direction

By mid-October 2024, the investment case transformed. Alphabet received a promotion to near the top of the Fantastic 40, signaling a fundamental change in how Laffont’s team viewed the company’s competitive prospects. Several developments converged to reshape this conclusion.

First came regulatory relief. A federal judge proposed antitrust remedies far less draconian than feared. Alphabet would need to adjust certain partnership arrangements but avoided the catastrophic scenario of divesting valuable assets like the Chrome browser. This removal of existential regulatory risk significantly enhanced the investment thesis.

Simultaneously, Philippe Laffont’s team observed tangible evidence that Alphabet was mounting a credible defense against generative AI competition. Data from Similarweb, shared by prominent hedge fund manager Chamath Palihapitiya, revealed that Google Gemini had captured substantial traffic share gains relative to ChatGPT over the preceding twelve months. This proved consequential because it highlighted a structural advantage for incumbent platforms: distribution.

Google leveraged this advantage aggressively by introducing “AI Mode” in 2024, integrating Gemini directly into the core search experience. The company also ensured Chrome users could easily access these AI capabilities. With nine applications boasting more than one billion users each — including six with over two billion users — Alphabet possessed an unmatched distribution network for Gemini adoption. This reservoir of existing users could more than compensate for any incremental search traffic lost to ChatGPT.

The Overlooked Engine: Cloud Computing’s Explosive Trajectory

Perhaps most significantly, the market had underestimated the financial impact of Alphabet’s cloud ambitions. While Google Search remained the iconic cash generator, Google Cloud had emerged as an even more compelling growth vehicle. The segment expanded at rates exceeding 30% year-over-year during the period, accompanied by impressive operating leverage improvements. Operating margins reached 21% in Q2, leaving substantial room for expansion relative to competitors with more mature cloud operations.

This meant that even if search faced meaningful headwinds — which hadn’t materialized in financial results, with Q2 Google Search revenue accelerating 12% year-over-year — the company possessed an entirely separate growth engine firing on all cylinders. Users engaging with Google’s latest AI Overviews feature, which synthesizes AI-generated answers from top search results, appeared highly engaged despite initial skepticism about cannibalization.

The Valuation Window: An Asymmetric Risk-Reward Setup

The final piece solidifying the investment case was valuation. Despite Alphabet’s prominence and competitive strength, the company’s forward price-to-earnings ratio remained below 26 — leaving meaningful room for multiple expansion relative to the broader market and especially relative to other AI-exposed equities trading at premium valuations.

Historical precedent offered perspective. When Motley Fool identified Netflix for inclusion in its recommended stock list on December 17, 2004, a $1,000 investment would have appreciated to approximately $590,287. Similarly, when Nvidia was added to the same list on April 15, 2005, a comparable $1,000 commitment would have grown to roughly $1,173,807. While past performance provides no guarantee, these examples underscore how early stage many investors still are in recognizing transformation occurring within technology’s giants.

The convergence of regulatory tailwinds, demonstrated competitive capabilities in generative AI, accelerating cloud growth, and reasonable valuation multiples creates the foundation for Philippe Laffont’s refined perspective on Alphabet’s role within portfolios over the next five years. The billionaire investor’s strategic reorientation reflects not a lack of conviction but rather a disciplined evolution of thinking as new evidence rewrote the narrative around Google’s competitive positioning.