Billionaire Bill Ackman’s hedge fund Pershing Square, ranked among the 20 most successful hedge funds globally by net gains since inception, made two notable portfolio shifts in the second quarter.
Ackman sold his fund’s entire stake in Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), a stock that had climbed 100% over the prior 18 months, signaling a change in outlook on the AI giant.
At the same time, Pershing Square initiated a new position in Netflix (NASDAQ: NFLX), which sits 42% below its record high set in June 2025.
Alphabet posted strong second-quarter results despite missing bottom-line estimates, with revenue rising 24% to $120 billion, marking the 12th consecutive quarter of double-digit growth.
GAAP operating income increased 31% to $41 billion, while Google Cloud revenue surged 82%, its fifth consecutive quarter of accelerating growth driven by AI infrastructure demand.
CEO Sundar Pichai noted that Gemini APIs now process approximately 22 billion tokens per minute, up from 16 billion the previous quarter, and that 90% of Fortune 100 companies use Gemini Enterprise.
Despite those results, Alphabet reported negative free cash flow for the first time as a public company and raised its 2026 capital expenditure guidance to $200 billion, up sharply from $91 billion the prior year.
That level of AI infrastructure spending appears to be the central reason Ackman exited his position, as heavy capex commitments can fuel significant stock volatility while bulls and bears debate the long-term payoff.
Netflix, meanwhile, remains the dominant subscription streaming service by monthly active users, revenue, retention rates, and share of total TV viewing time across any major platform.
The company fell out of favour after failing to win bidding wars for Warner Bros. Discovery and Roku, but analysts still see strong fundamentals underpinning its business model and pricing power.
Wall Street estimates Netflix’s earnings will grow at 21% annually over the next three years, making the current valuation of 24.7 times earnings appear attractive relative to that growth outlook.
Netflix holds a median analyst target price of $94 per share, implying roughly 20% upside from the current share price of $78, with most analysts viewing the stock as undervalued at current levels.
The streaming market is forecast to grow at 10% annually through 2030, and Netflix still has largely untapped opportunities in advertising, live sports, and theatrical releases that could meaningfully expand revenue.
Among the 10 most-watched original streaming series and movies in the final week of August, Netflix produced four of the series and all six of the top movies, underlining its content dominance.
Ackman’s contrarian move out of a high-flying AI stock and into a beaten-down streaming giant reflects a disciplined value approach that has helped Pershing Square build its reputation over decades of investing.
