Billionaire Bill Ackman Dumps Alphabet and Loads Up On a Mega-Cap Stock Down 15% From Its Peak

Bill Ackman runs Pershing Square Capital Management, and the investment firm made some interesting investment moves this year. During Q2, Ackman sold off the remainder of Pershing Square's Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) stake. This was after buying into Alphabet in Q1. Considering how successful an investment Alphabet has been over the past year and how rapidly it's growing thanks to its artificial intelligence (AI)-related efforts, this move is a bit of a head-scratcher.

However, Ackman didn't sit idle with his money. Instead, he purchased shares of another AI-related tech giant trading down about 15% from its peak: Meta Platforms (NASDAQ: META). Was that the right move for Ackman and Pershing Square? Should you follow Ackman's lead here? Let's take a look.

Pershing Square Capital Management CEO Bill Ackman. Image source: Getty Images.

This tech giant swap is starting to pay off

During Q2, Pershing Square increased its stake in Meta Platforms by about 20%. That's no small investment, and when it exited Alphabet in favor of other stocks like Meta, it was interpreted as a sign that Pershing believes Alphabet's best buys (at least in the short term) are behind it.

Judging by the stocks' performance in Q3, Ackman might have been right. Meta has returned over 19% since Q2 ended, while Alphabet has lost investors' money.

Data by YCharts.

This change in sentiment could be tied to enthusiasm for Meta Platforms' recent successful AI product launches. One of the most successful AI product launches to date is Muse, its personal AI agent. This platform has long been promised by Meta, and its initial reception has far exceeded expectations. It can do tasks like shopping, managing a user's calendar, and helping the user set goals. While there isn't any direct revenue associated with Muse via use fees or a subscription, it keeps users tied to the Meta ecosystem and could eventually be monetized once users have become accustomed to using it.

Alphabet really hasn't had anything groundbreaking for investors to get excited about in recent months, which could be why its share performance has been flat. While Pershing Square's stock transactions took place several months ago, Ackman is considered a long-term investor, so his moves can be analyzed for months after they actually happened.

Which raises the question: Is this still the right investment to make today?

Meta's stock is still cheaper

Despite its monster 19% rally this quarter, Meta is still a cheaper stock than Alphabet. Some of this rally can be explained by the extremely bearish sentiment in the market turning into optimism, which requires a price change. The market remains very bullish on Alphabet's prospects, so it trades at a rather high valuation.

Currently, Alphabet's price-to-earnings ratio is skewed by its huge gains in investments, but if investors use 2027 earnings projections, that effect is absent. From that standpoint, Meta is still cheaper.

Data by YCharts.

While Meta's recent rally has closed the gap a bit, the reality is that 19.5 times next year's earnings isn't a bad price to pay for Meta's stock, so there could be time to get into the stock now before the rally is over. However, with the market ignoring Alphabet a little bit, I think now could also be a great time to get into that stock, as it could be primed to take off with a successful product release. Furthermore, another one of Alphabet's major investments is going public soon: Anthropic. This could provide it with another hundred-billion-dollar-plus payday and give Alphabet access to more cash that it can use to increase its AI footprint.

I think both of these stocks are solid investments right now. If Meta can keep doing what it's doing, then it has the potential to continue this rally through the end of the year. Alphabet may be a bit of a sleeping giant, especially with a boring middle of the year. I think each of these stocks is also a great pick for 2027, and investing now should deliver market-beating returns moving forward.

Keithen Drury has positions in Alphabet and Meta Platforms. The Motley Fool has positions in and recommends Alphabet and Meta Platforms. The Motley Fool has a disclosure policy.