Bill Ackman's Pershing Square Capital Management exited its entire Alphabet stake during Q2 and used the proceeds to buy Meta Platforms shares instead. Meta has since rallied over 19% while Alphabet has lost investors money over the same stretch, and Meta still trades at the cheaper valuation of the two on 2027 earnings projections.
Pershing Square Capital Management sold off the remainder of its Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) stake during Q2, just one quarter after buying into the stock. Ackman then put that money into Meta Platforms (NASDAQ: META), a stock that was trading down about 15% from its peak at the time.
Meta rallies while Alphabet stalls
Pershing Square also increased its Meta stake by about 20% during Q2, a move that reads as a bet Alphabet's best near-term gains were already behind it. That bet has paid off so far: Meta has returned over 19% since Q2 ended, while Alphabet has lost investors money over the same stretch.
Part of the shift in sentiment could be tied to enthusiasm for Meta's AI product launches. Meta rolled out Muse, a personal AI agent that can handle tasks like shopping, managing a calendar, and helping users set goals, and its initial reception has exceeded expectations. There is no direct revenue tied to Muse yet through fees or a subscription, but it keeps users inside Meta's ecosystem and could eventually be monetized.
Alphabet, meanwhile, hasn't had a groundbreaking announcement to excite investors in recent months, which could explain why its shares have stayed flat.
The valuation gap hasn't closed
Despite this quarter's rally, Meta still carries the cheaper valuation of the two stocks. Using 2027 earnings projections strips out the effect of Alphabet's investment gains on its price-to-earnings ratio. On that basis, Meta currently trades at 19.5 times next year's earnings.
Alphabet still has a catalyst of its own on the horizon. Anthropic is going public soon, one of Alphabet's major investments, which could hand it another hundred-billion-dollar-plus payday and more cash to expand its AI footprint.
Source: The Motley Fool
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