| | | | 🤔 My Thoughts
Google’s parent company, Alphabet Inc. (GOOG), is seeing a nice pop today, driven by strong first-quarter performance and optimism about its AI and cloud divisions.
Alphabet reported a potential revenue increase, fueled by robust growth in its cloud unit, which grew 30% year-over-year to $11.96 billion in Q4 2024, and its advertising business, particularly YouTube and search, which saw 13.8% and 12.5% revenue growth, respectively.
Investors are encouraged by Alphabet’s AI advancements, with products like Gemini enhancing its offerings across search, cloud, and autonomous driving via Waymo, which scaled from 10,000 to 150,000 weekly paid rides by late 2024. We’re still skeptical about the prospects of these speculative ventures but it’s good to see renewed investment in R&D.
Posts on X highlight bullish sentiment, noting Alphabet’s dominance in AI, cloud, and search, alongside a $70 billion stock buyback program and a $23 billion cybersecurity acquisition, signaling confidence in long-term growth. A softer stance from President Trump on tariffs and Federal Reserve independence has also eased market volatility, boosting tech stocks, including Alphabet, as investor fears of trade disruptions subside.
So should you rush out to snap up shares at these sky-high prices?
Not necessarily
Despite the rally, Alphabet faces significant risks. Ongoing antitrust lawsuits pose a major threat, with a federal judge ruling that Google illegally monopolized online advertising technology, potentially forcing divestitures like Chrome or Android.
The Department of Justice’s proposals, with a trial set for April 2025, could disrupt Alphabet’s ecosystem and market dominance. Competition in AI, particularly from OpenAI’s ChatGPT, is another concern, as some investors note Gemini’s struggle to gain traction, potentially eroding search market share.
Macroeconomic uncertainty, including high inflation (2.8% vs. the Fed’s 2% target) and tariff-related trade tensions, could pressure earnings, especially if a recession materializes, with Goldman Sachs estimating a 45% chance in 2025.
If you already hold Google - and that’s likely if you have any kind of 401(k) or index fund long term investments - enjoy the pop. But we don’t think the roller coaster is over for the tech giants. Far from it. | | | | |
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