Alphabet Inc (GOOG)

How can they sustain their huge market share? AI's riskiness threatens to corrode their market share.

The Google cloud will likely outgrow Microsoft's because the latter's is mature. Google has room to grow. If OpenAI becomes a force, then Alphabet's internet search will be threatened, but data doesn't signal this happening now. Reaction to their earnings today sucks. The CEO soft-pedaled AI, a mistake. Now, they must catch up by using Deep Mind and Google Brain more, by incorporating those two into the entire Google suite of apps and software like Gmail. They must do this, but are hesitant to really dive into AI. This is reflected in the share price. However, internet search revenues remain solid. They've saved money through layoffs, but that won't be reflected until the next quarter.

Owns shares in the company.
Believes advances in A.I. very good for company.
Company on the bleeding edge of R&D in A.I.
Excellent long term prospects for the business. 
Good long term investment. 

There's potentially 10% downside in any stock including this. Megatech is up this year because people believe in their balance sheets and seen as safe. They're also more efficient now. There was also FOMO at play.

Under lots of pressure: potentially losing the AI race, global advertising market, some threat to Search. These haven't manifested yet in the financials. Good job at capex spending, invests about 1/3 of cashflow back into the business, and that's why it's so hard to dethrone it. 17.5x earnings, massive amount of hidden value. Be patient.

GOOG faces an existential crisis: Are reports that Samsung will ditch Google and use Bing instead. Also, GOOG faces anti-trust threats from regulators over the digital ad market. Alphabet has invested money in various bets that aren't going anywhere, like Fitbit or Waymo. But if search revenues are split with Bing, that will impact Alphabet hard; search is their core business.

Their cloud will be profitable. Shares are holding up vs. the market.

Top search place for people selling products and, so, advertisers. 18x earnings, $50B in free cashflow, great balance sheet. YouTube is a great asset. Still lots of growth in digital advertising, currently has strongest market share. Their AI will get there eventually. No dividend.

The question was on buying Google or Apple. He likes all the big techs. They are safe havens which will see very good earnings per share growth over the next 3 to 5 years through cost cutting. This includes Amazon which has some of the best businesses in the world, not the retail part though, which could improve with cost cutting. Google is cheaper than Apple but is facing more competition, although Bing is not a threat to the Google search engine. People are loyal to Apple products which are addictive.

Tech is merely a momentum trade and won't last. That's why he bought Google this week, and he will keep some of it long-term. Three years from now, stocks will be higher than where they are now. Tech fundamentals no better today than last week. 

Great company.
Like large tech stocks despite rising interest rates.
Wait to buy. 
Hoping shares fall before falling.

He bought a position this morning. There will be challenges, but it's cheap and they will be more efficient coming out of this cycle. He got comfort from the court hearings today.

AI is an area of growth, product launch hiccup is no big deal. Incredible market share in Search, marketing, and advertising. MSFT has only a 3% share in Search. Will get a lot of the $200B global digital ad business. Despite an ad recession, that area's going to grow. 18x earnings. Has beaten its cost of capital every year it's been public. No dividend.

GOOG used to have a motto, "Don't be evil." Then quietly, they said don't worry about that. Future remains to be seen. Every tech that seemed to have had a natural monopoly faces competition. ChatGPT is that competition right now. Wait till you see a plan that you can understand as to how GOOG will retake dominance. 

A big question is how will AI affect the search business. Google will probably have a competitive product but how will advertising revenue be affected. It is making new lows on a relative strength basis. Look to other areas of the market.