Alphabet's AI Investment and Revenue Growth Concerns

Alphabet's revenue and earnings rise, but concern grows over the substantial investment in AI, impacting stock performance.

### Alphabet's AI Investment and Future Growth Prospects
* 💰  Alphabet's revenue increased by **approximately 15%**, with earnings per share rising by **31%**.
* 💻  The company is investing heavily in AI, spending **$13 billion per quarter** and aiming for **$50 billion in 2024**.
* 📊  Despite concerns about the ROI of this investment, Google still has **$80 billion in net cash** on its balance sheet.
* 🔮  Analysts believe that the **long-term potential of AI** justifies the current spending, comparing it to the **gradual growth of cloud services**.
* 🚗  Waymo, Alphabet's autonomous driving division, is also receiving significant investment, with **50,000 paid rides per week** and an additional **$5 billion investment**.
* 📉  The market is experiencing a **broad sell-off in tech stocks**, but some see it as a **healthy correction** that will benefit other sectors.
* 📈  While AI may take time to become a **major revenue driver**, analysts remain optimistic about its **long-term potential**.
* 🔬  The future of AI and autonomous driving is seen as a **key growth avenue** for Alphabet and other tech companies, despite requiring **patience from investors**.

You hold shares of Alphabet that down
the most since February; revenue up some 15%; earnings per share jumping 31%.
But it seems to be this idea of plunging $13 billion per quarter into AI.
That is the real worry here. Sure.
Hi, Caroline. Thanks for having me.
You know, in terms of Google, we thought it was a pretty solid quarter.
Know, we had strength in revenues out of search and YouTube, and cloud was pretty
strong. Now, the $13 billion that is being spent
on CapEx, and the 25 billion that's been spent so far year to date, you
know, take that and you say it's going to be 50 billion for 2024.
You know, Google still has $80 billion of net cash on their balance sheet.
And so, you know, I think the spend is warranted; that infrastructure is really
needed. They needed to do it for the cloud
growth to begin with.

And so, you know, it is something that
all the hyperscalers are continuing to do in 2024.
And investors are just asking, you know, what is that return on investment at
some point in 2025? Yoko.
When I was on the phone with Ruth Park, I asked her if she would give me a
revenue run rate number like IWC did. You probably remember last quarter, she
said, I'm not going to do that because we'll address it on the analyst call.
On the analyst call. They said that year to date they had
billions of dollars of revenue from AI, infrastructure, and generative AI.
And I'm just curious for like an investor like you, why wasn't that
enough? If it was so good for Amazon to give a
number like that. A few months ago,
I think it's on the spending side. I think historically we've seen that
companies that spend more on CapEx just

have less room on their free cash flow
to spend on money being returned to shareholders.
So that's probably the reason why the stock selling off a little bit today.
But over the long term, the valuation for Google is not extreme.
It still is a quality company. It still has a good business model, and I
think it's pretty attractive at these levels.
What's so interesting is it feels as though Alphabet and indeed slightly
Tesla are just shaking all of our concerns about the AI hype and the fact
that this isn't going to be hugely revenue-generating in this quarter or
the next. How is your patience for AI to pay off,
whether it's Alphabet or whether it's in video or some of the other names?
I've just gone stratospheric and the hope the AI is becoming a profitable
reality. Sure.
So I think in the broader scheme of things, you know, this sell-off in
technology shares across all of tech.

I think it's actually a healthy thing
for markets. We're seeing the broadening out of
markets that we've been talking about for so long, and you're seeing other
areas of the market sort of pick up the slack, which is great to see.
You know, I think for AI, it's Sundar Pichai at it in terms of taking time.
It's all going to take time. And when we look back at the cloud and
the growth of cloud, that also took time.
I mean, it was Microsoft Azure and Google Cloud were all being built,
you know, years and years ago. And we're just starting to see that
benefit. And they're still growing at 25% plus
rates. And so
I think that AI is probably on a similar trajectory.
It's just not going to be in a straight line.
Ioco Waymo, 50,000 paid rides a week, so Alphabet puts another $5 billion into
it.

Your reaction to that?
You know, I think just as Tesla is putting money into the Robotaxi side of
things. I think autonomous driving cars are something that is a long-term growth
driver for many of these companies, whether it be Google or Tesla or even in
video. In terms of the overall chips that will
be installed in many of these cars. So I think it's still, again, another
leg that maybe, yeah, again, take more time that investors don't always have
the patience for. But it is another growth avenue for
many of these stocks.

Alphabet Shares Drop as Investors Wait for AI to Pay Off

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Bloomberg Technology

Alphabet's Financial Performance and Massive AI Investment

Alphabet's shares are experiencing the most significant drop since February, despite a 15% increase in revenue and a 31% jump in earnings per share.

The company's plan to invest $13 billion per quarter in AI is causing concern among investors about the return on investment.

The decision to spend heavily on CapEx, totaling $25 billion year to date with a projected $50 billion for 2024, is being questioned in terms of its impact and the lack of a revenue run rate number provided to investors.

Google's Stock Performance and Long-Term Outlook

Google's stock is currently experiencing a slight sell-off, possibly due to reduced cash flow for shareholders.

However, the company is still considered to have a strong business model and is seen as a quality investment.

Despite concerns about AI revenue, there is optimism about its long-term profitability, including its impact on Google and other tech companies.

The broadening of markets is a positive development, with different areas picking up the slack.

The expansion of AI and the cloud took time to develop, similar to the current trajectory of AI.

Alphabet's significant investment in Waymo indicates the company's confidence in the project's potential.

The Long-Term Growth Potential of Autonomous Driving Cars

Autonomous driving cars are a significant long-term growth driver for companies like Tesla and Google.

The development of chips for these cars is another growth avenue for the stocks, despite requiring patience from investors.

The expansion of the Robotaxi side and the installation of chips in autonomous vehicles are expected to contribute to the growth of these companies.