Alphabet Inc (GOOG)

They pivoted to Cloud and did well for 1.5 years, then pivoted to NFL Football and are losing money in it, then pivoted to AI but need to invest more in it. All told, it's a cheap stock that needs to stay focused on YouTube to be worth a lot more.

Has been challenge by an anti-trust investigation and the AI race, but GOOG has the powerful YouTube franchise and internet search. They botched their conference call by not explaining with their Cloud business took a misstep. Didn't explain much of their NFL programming. Cloud should have done better. Poor conference call. There isn't anything wrong with GOOG except that cloud glitch.

They just reported numbers with Cloud revenue missing estimates and management didn't explain why. Management should have also focussed on the strength of YouTube.

Some were worried that they would lose the AI race, but they have developed AI tools. They own Android's operating system, dominate online search and have a competitive cloud business. Cash flow is huge. Acquisitions have worked well.

Owns and likes both, but MSFT gets the nod if you forced him to choose, because of its AI potential.

A lot of the trend right now is in AI, and MSFT will be the winner. They already have the platform, just increase the price and that's good for margins. Strong user-installed base that AI can leapfrog off of.

GOOG is more of an advertising company, and ads are coming back. Net margins of 25%, good growth. GOOG will have more work to do on the AI front. Given the recent price drop, there are worse companies to buy.

Cloud computing division growth not as high as Microsoft. Dominant in search business. Very strong YouTube segment. Excellent in A.I. tech. Valuation at 19x forward earnings is attractive. Very strong brand and franchise. 

Reported yesterday and the market sold off. To him, their sales and earnings looked pretty good, but their cloud growth slowed by 1-2%, though still very good YOY. The sell-off was wildly overdone and reflects wider market sentiment. Recently bought this. It's the #1 leader in online ads, given their search engine at 85-90% market share. Has a wide, deep moat. They also own YouTube which Gen-Z loves to watch, and owns Android, a dominant phone. Their cloud is a distant #3 player, though. Their leading position in gen-AI is a kicker. Have earnings momentum to grow around 15%.

Down on earnings today, but a good time to buy. 82% of earnings are from advertising. Their cloud is run very well, #2 before Amazon and Microsoft.

Reports next week and he expects a good quarter. It's now closest to its all-time high, among the FAANGs. The stock has done nothing the past two years, but earnings growth is better than Apple's.

Wonderful business and compounder. Holds, but hasn't been buying for new clients because valuation's run up. Debt free, gushes cash. Staggering capex makes their products so good. Good management. Wait, and with market volatility, you'll get your chance to buy.

Now embarking on AI. Boasts a long track record of innovation and successfully integrating tech companies. Trades in the low-20x PE, not far from consumer product companies, but boasts better growth rates. They spend $20 billion yearly on R&D. Really likes this company.

They have $70 billion in free cash flow. Cash flow is now important, becaue they don't need the debt markets to grow. He's buying more on weakness. There's growth in many megatech, given growth potential as well as cash.

Agrees with Bill Ackman that GOOG botched their AI launch and let MSFT take the lead. MSFT is the top AI play, even ahead of Nvidia. Demand for cloud will increase as demand for AI rises, because AI needs more cloud. GOOG is starting to charge a subscription for services, like MSFT, making their revenue stream consistent. He likes and owns both.

Though MSFT is up 32% this year vs. GOOG's 49%, he prefers MSFT, because Google fumbled their AI roll-out while MSFT will benefit more from AI, as offered in their suite of services and how it benefits their consumers. Both companies are strong with strong user bases and will benefit from AI.