<div id="readability-page-1">AI-themed stocks have been all the rage on Wall Street for the past few years, but at the start of 2026, the landscape appears to be shifting. Worries about the amount being spent on the buildout of AI infrastructure, along with concerns about valuations, have led to a more cautious environment. That has been evident in a volatile market defined by constant swings of sentiment.<h3>President's Day Sale - 70% Off</h3><ul><li>Unlock hedge fund-level data and powerful investing tools for smarter, sharper decisions </li><li> Stay ahead of the market with the latest news and analysis and maximize your portfolio's potential</li></ul> Volatility is not something Cathie Wood necessarily shies away from, even stating that &#34;volatility is not a bad word,&#34; and seeing it as an unavoidable feature of investing in disruptive innovation. You could say both Alphabet (NASDAQ:GOOGL) and Palantir (NASDAQ:PLTR) operate at the forefront of AI-led innovation and both have found a place in Wood's Ark Invest portfolio. But recently, Wood has been loading up on one of these names while reducing her exposure to the other. So, let's find out which high-conviction AI stock the Ark CEO currently favors, and with some assistance from the TipRanks database, we can see whether the Street's analysts see her choices in a positive light. Alphabet Alphabet has been investing in AI for many years, long before the current generative AI boom pushed the technology into the mainstream. From foundational research at DeepMind to in-house development of large language models and custom silicon like TPUs, the company has steadily built a vertically integrated AI stack. But, interestingly, when genAI started to attract mainstream attention, Alphabet was seen as not quite as well-positioned as peers like Microsoft, an early backer of ChatGPT maker OpenAI. The talk was of disruption risk, with concerns that offerings like ChatGPT could erode Google's online search dominance. But sentiment did eventually turn in Alphabet's favor as the company started showing its AI game was very strong. The launch of Gemini 3 helped cement that shift, with the model outperforming rivals such as ChatGPT on several key benchmarks. Just as importantly, people are actually using it. Gemini apps now reach 750 million monthly active users, and uptake among enterprise customers has been particularly strong. The shift in narrative made Alphabet the Mag 7 stock to own last year, but the gains have been harder to come by in 2026 as general sentiment toward AI high-flyers has become more cautious, particularly as the hyperscalers – Alphabet among them – intend to ramp up AI-related spend considerably this year. But Cathie Wood seems undaunted by all that and must like the opportunity offered here. During 4Q25, ARK Invest bought 206,936 shares, upping its GOOGL stake by 62%. For J.P. Morgan's Doug Anmuth, all the money being spent by Alphabet on the AI buildout will be worth it. &#34;We believe the doubling of capex comes from a position of strength, but there is significant focus on depreciation, which will accelerate in 2026, &amp; FCF, which we model to fall to $29B (-61% Y/Y),&#34; Anmuth, who ranks among the top 4% of Street stock experts, said. &#34;However, we believe the valuation framework for many remains anchored around 25x-30x on $14+ in 2027 GAAP EPS. Google, Meta, and Amazon are all meaningfully pressuring their cash generation. However, we believe GOOGL has a broad set of monetization levers, including Search, Cloud, and a growing AIdriven ad opportunity, with the massive growth in backlog providing a tangible bridge to future revenue and margin expansion.&#34; &#34;Additionally,&#34; the 5-star analyst added, &#34;we believe GOOGL is best positioned to support the large jump in capex as GOOGL currently has $80B in net cash, ahead of AMZN's $57B &amp; META's &amp; $23B, and should generate the most cash in 2026. Google's full stack AI differentiation, as highlighted in the 10-K, further reinforces our conviction in the company's ability to drive multi-year value from these investments… GOOGL remains our top pick coming out of Internet Mag 7 earnings.&#34; Accordingly, Anmuth rates the shares as Overweight (i.e., Buy), while his $395 price target points toward 12-month returns of 29%. (To watch Anmuth's track record, click here) Elsewhere on the Street, the stock claims an additional 26 Buys and 7 Holds, for a Strong Buy consensus rating. Going by the $377.23 average price target, a year from now, shares will be changing hands for a 22% premium. (See GOOGL stock forecast)</div>

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Cathie Wood has increased her investment in Alphabet (GOOGL) while reducing her stake in Palantir (PLTR), reflecting her confidence in Alphabet's AI capabilities. Despite a cautious market, Alphabet's AI initiatives, including the successful launch of Gemini 3, have positioned it favorably. J.P. Morgan's Doug Anmuth supports this view, highlighting Alphabet's strong cash position and potential for revenue growth. The stock has a Strong Buy consensus rating, with a 12-month price target suggesting a 22% increase.

- AI-themed stocks have experienced volatility due to concerns about spending and valuations, leading to a cautious market in 2026.  
- Cathie Wood’s Ark Invest notably increased its stake in Alphabet while reducing its investment in Palantir, favoring Alphabet's AI developments, particularly the successful launch of Gemini 3.  
- Analysts, like J.P. Morgan's Doug Anmuth, see Alphabet as well-positioned to capitalize on significant capital expenditures, offering optimism with a target price of $395, indicating potential returns of 29%.

Alphabet or Palantir: Cathie Wood Loads Up on One High-Conviction AI Stock