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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