Appreciate you sharing this! Was super easy to digest and broken down well. Definitely wild to see such a large name as beaten down as it has been.
I think the trend of YouTube taking over Netflix will only continue as Gen Z and Gen Alpha get older. I myself pretty much just have a Netflix subscription for the occasional movie. Most of my short to mid-length content I watch on YouTube. I know of some people who even use it for movies. YouTube shorts will definitely play into this at some point, though it's not quite as good (re: aggressively addicting) as Instagram Reels or TikTok yet.
Solid breakdown — but calling it “worth $300” feels generous. Google’s moat isn’t in question, but $85B in CapEx isn’t a rounding error. If those AI bets don’t earn above cost of capital, shareholders just paid for the most expensive science project in history.
Well said. But if AI were to fail, then Alphabet remains the undisputed leader in Search and there is no disruption. GOOG might rerate in that case as well.
Also, even after the $85B Capex, GOOG will probably generate >$60B Free Cash Flow (my back of the envelope estimate) - so they can very well afford the large spend.
Another way to think about this is how is Google trying to capitalize on AI, are they trying to get to AGI as the success metric or making use of AI to improve all parts of the business by enabling its employees and customers with what LLMs are able to achieve today. AGI is not required to succeed in the short term. $85B is a drop in the bucket if they enable multiples of efficiency across the business.
If you back out SBC, then FCF is closer to $50bn which puts the fcf multiple at 76x, whereas earnings multiple is 31x because depreciation hasn’t hit yet from increased capex. What makes you believe that capex will not continue to increase from here. If it doesn’t decrease then Google is on a perpetual wheel of lower fcf. Hence is super expensive here
I would normally be open to investing except for the fact that I believe that they are most likely the lead dog and possible cause of wide spread infringement of patent technology owned by Netlist...
As a result, my investment portfolio will continue to shun this company until all open patent infringement cases that Netlist has open are resolved.
There are plenty of other opportunities without this IP infringement shadow.
Admire your clarity of thought when analyzing a business like Google. Huge fan of your work. Thanks for sharing
Thank you!
Appreciate you sharing this! Was super easy to digest and broken down well. Definitely wild to see such a large name as beaten down as it has been.
I think the trend of YouTube taking over Netflix will only continue as Gen Z and Gen Alpha get older. I myself pretty much just have a Netflix subscription for the occasional movie. Most of my short to mid-length content I watch on YouTube. I know of some people who even use it for movies. YouTube shorts will definitely play into this at some point, though it's not quite as good (re: aggressively addicting) as Instagram Reels or TikTok yet.
Solid breakdown — but calling it “worth $300” feels generous. Google’s moat isn’t in question, but $85B in CapEx isn’t a rounding error. If those AI bets don’t earn above cost of capital, shareholders just paid for the most expensive science project in history.
Well said. But if AI were to fail, then Alphabet remains the undisputed leader in Search and there is no disruption. GOOG might rerate in that case as well.
Also, even after the $85B Capex, GOOG will probably generate >$60B Free Cash Flow (my back of the envelope estimate) - so they can very well afford the large spend.
Another way to think about this is how is Google trying to capitalize on AI, are they trying to get to AGI as the success metric or making use of AI to improve all parts of the business by enabling its employees and customers with what LLMs are able to achieve today. AGI is not required to succeed in the short term. $85B is a drop in the bucket if they enable multiples of efficiency across the business.
It's clear that the stock market is beyond rational economics
If you back out SBC, then FCF is closer to $50bn which puts the fcf multiple at 76x, whereas earnings multiple is 31x because depreciation hasn’t hit yet from increased capex. What makes you believe that capex will not continue to increase from here. If it doesn’t decrease then Google is on a perpetual wheel of lower fcf. Hence is super expensive here
I would normally be open to investing except for the fact that I believe that they are most likely the lead dog and possible cause of wide spread infringement of patent technology owned by Netlist...
As a result, my investment portfolio will continue to shun this company until all open patent infringement cases that Netlist has open are resolved.
There are plenty of other opportunities without this IP infringement shadow.
After baba announced its AI chip development, is it in the similar position as Google that has all 3 elements too?