Google has turned AI from a search threat into a growth driver

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 20:35

   There's no question about it. prior to ai they had search they controlled 90 percent of search i mean it was basically a monopoly they hadn't raised any capital from inception. Today, they're in the hunt for AI, and they just raised $85 billion in equity capital, which was kind of shocking to everybody. What are your thoughts on Google in this world? The quick thought is Google is an AI winner, right? I think a year ago, when the stock was at 180, everybody considered them the AI loser, because search is going to go away. We're not I'm not going to use search anymore.

2. 21:15

   He or J is going to break them up. He or J is going to break them up. The whole thing is going to fall apart. By the end of last year, Google was the AI winner. Yes. The only one. That was a flip. I call that a flippity flip. They were a completely integrated AI company with the model and the chips and the cloud. And they had everything. Right. And they had a state-of-the-art model. And everybody got super excited about them for good reason.

3. 21:40

   Google Cloud accelerated growth into the 60s. And it's a very big business. And importantly, the search advertising growth accelerated. So this whole notion that search is dying, instead of it dying, it accelerated. Why? Because they're using AI to sell us more ads for more money. So it's working. What's happened since then is that there's been a little bit of a pullback on the notion that they're an AI winner.

4. 22:06

   Because as we sit here today, Google's model is no longer state of the art. They're actually a little far behind. They're having internal issues because they're a bureaucracy, unlike OpenAI and Anthropik, that are startups. And by the way, they— Awesome engineers, you know. Noam Shazeer, who's one of the inventors of AI. And then— Where did he go? OpenAI. OpenAI. Went to OpenAI. Okay. And so then you get to a point where, oh, wait a second.

5. 22:30

   They have a distant second consumer chat. They're distant third on enterprise AI. So maybe they're not the winner. They're a winner. But that's still a lot better than we were a year ago. What do you think? I mean, my view is from an end-to-end perspective, they're the best position hyperscaler relative to the crowd right now. I think in the eyes of investors, but for good reason, because what Kurian's done on cloud has been phenomenal.

6. 23:01

   On search, they've gained share. Gemini is never going to be as good as Anthropic or OpenAI. but it keeps coming down to like where are they go like around the corner what are they building they're looking for more and more ways to monetize and I think one of the things that investors are, I think, are underestimating is whether it's like Meta, using part of what they spend on CapEx to ultimately like, almost from a hyperscale perspective in terms of monetize it. It's these companies, when they build these, I won't call it moats, when they build out their ecosystem, the monetization capabilities, the street is still way underestimating. And I think Alphabet is a good example of one where they raised capital.

7. 23:47

   That was the right move. Investors, obviously, were a little frustrated, but I think investors understand in this arms race, this AI party, like I said, the party started 9 p.m., goes to 4 a.m. It's like 11 p.m. at the party. You don't want to be on the outside looking in at the party saying, how do I get in? And I think that's the danger for companies that don't spend.