Move Over, AST SpaceMobile: Alphabet Has a Surprising New No. 1 Holding... and It's From the Financial Sector

In case you missed it, one of the most important data releases of the quarter hit the newswires on May 15: Form 13F filings. These filings provide investors with a way to track which stocks Wall Street's savviest fund managers and businesses bought and sold in the latest quarter.

Google parent Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) is one company that's required to file quarterly 13Fs for its $4 billion investment portfolio. While satellite-based cellular broadband services provider AST SpaceMobile (NASDAQ: ASTS) had been Alphabet's No. 1 holding in each of the three previous quarters, this isn't the case any longer. It's been unseated by financial services giant CME Group (NASDAQ: CME).

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AST SpaceMobile still makes up more than 18% of Alphabet's $4 billion portfolio

Although AST was dethroned as Alphabet's largest investment holding, Google's parent didn't sell a share (it still holds 8,943,486 shares). This likely has to do with AST's two core catalysts remaining firmly in place.

First, its BlueBird satellites work with existing smartphone technology. Whereas prior-generation satellite-based cellular networks required specialized devices, AST's network is ready to roll with what consumers are already using.

Secondly, AST SpaceMobile has secured partnerships with more than 50 global mobile network providers. Instead of fighting an uphill battle against established wireless providers to earn subscribers, it's partnering with them, giving AST access to 5.8 billion combined subscribers. In theory, this should lead to a rapid sales ramp as its satellite-based cellular broadband network expands.

At the same time, AST's operating model is capital-intensive and has little margin for error. Higher satellite production costs and launch delays can adversely affect a stock that's soared by more than 1,800% over the trailing two years.

Image source: Getty Images.

Alphabet takes a billion-dollar stake in CME Group

While Alphabet exited six positions in the first quarter and opened three others, none was more of an eyebrow-raiser than the 3,484,020 shares purchased of financial services company CME Group -- a stake worth $1.03 billion as of March 31.

As is typical, Alphabet almost exclusively invests in companies with which it already has working partnerships. Google announced an equity investment of $1 billion in nonvoting shares of convertible, preferred CME Group stock in November 2021. The duo also forged a 10-year partnership that's seen CME rely on Google Cloud to host its trading system.

Arguably, the biggest lure of CME Group for investors is the dominance and uniqueness of its financial derivatives trading platforms (futures and option contracts). CME accounts for approximately 90% of U.S. futures market share and is also the undisputed global leader in equity index futures. This sustainable moat has been a multidecade tailwind for CME, with average daily volume reaching an all-time high of 36.2 million contracts in the first quarter.

But CME Group's margins are no slouch, either. The beauty of technology-driven trading platforms is that they're asset-light, leading to double-digit sales growth in most quarters and a gross margin that's trended into the mid-80% range.

CME Group is leading the cloud-based and AI-driven transformation of the financial services space, and Alphabet stands to benefit as both an investor and the company whose AI-fueled cloud infrastructure service platform is powering this shift.

Sean Williams has positions in Alphabet. The Motley Fool has positions in and recommends AST SpaceMobile, Alphabet, and CME Group. The Motley Fool has a disclosure policy.