Alphabet (GOOGL): Diversified Growth and AI Powerhouse

**SPEAKER_1** (0:00)
Let's go deep on Alphabet in our Tech Spotlight. Joining me right now, Geoff Nielsen, Chief Digital Officer Info-Tech Research Group. I'm so glad you're with us. Where does Alphabet really fit in to the big picture? What's it standing in the market at this point, in your opinion?

**Geoff Nielsen** (0:17)
Well, you know, Alphabet's standing, and thank you for having me, is something that's a little bit lower right now than I think you would have seen a few weeks ago, but to me, it's a powerhouse long-term stock. It's got an amazing long-term record, and frankly, it's built for any weather. So even though the stock has pulled back, I really don't think the core fundamentals of the business have, and I feel really excited about it.

**SPEAKER_1** (0:39)
Well, that is exciting. I mean, we know that we talk about Google's Gemini versus Anthropic, and there was a lot of worry about Google search, whether or not it would stay afloat with AI. How is it holding its own that makes you not worried?

**Geoff Nielsen** (0:54)
Sure. So let's dig into each of those individually. So Gemini right now 3.8 Flash is the next version to watch, and this to me clearly is two things. It's an enterprise play and it's a catch-up play.
It's trying to catch up with Anthropic, which has gotten way out ahead in terms of what it's doing for coding, for workflow, and I'm okay with that. I think not only is Google in the mix here, but because they've got the infrastructure, because they've got the scale, even being at pace with some of these firms is going to end up putting them way ahead because of their core business. And let's talk about Search for a minute, because everybody said that AI was going to eat Search's lunch. And if you look at the last results, Search is actually up from a revenue perspective 17 percent. This is huge. Somehow, we're seeing that AI is actually helping Search versus hurting. So I think that the downside risk here is way overblown.

**SPEAKER_1** (1:46)
Okay. So if someone were to play some devil's advocate, when you think about the competitive landscape, who would you say are some of the biggest competitors? I know there's also a lot of collaborations going on.

**Geoff Nielsen** (2:00)
So I think that the nice thing about Google is that they sort of have a finger in every pie that the rest of the Big 7 is in, right? So I think they do ads, frankly, better than Meta. I think they do video better than Netflix does.
We just talked about what's going on with Tesla. They've got Waymo that they're working on there. And they're competing against the open AIs and the anthropics of the world. I really like this diversification because, look, I'll be honest, I don't know how the market's going to shake out with all the AI stocks and all the rapid growth we've seen in the next three to six months. Correction, absolutely. But to me, all weather stock, right? We think every engine still firing pretty nicely. And no matter what shakes out at any one of those areas, I just see the risk as being lower than any of those other individuals.

**SPEAKER_1** (2:46)
What are your thoughts on the CapEx spend situation overall in the last earning season too? What did that tell you about the AI spending CapEx?

**Geoff Nielsen** (2:56)
So I think that CapEx right now, this is the entire debate around the valuation of the Google stock. And whether you like it or not, I think that this is just cost of doing business or big tech, right? You've got to be putting up these big dollars or you're going to risk being left behind. And I don't think Google is being left behind at all. Now, the reason I really like this is, look, if AI grows and it expands the way we think it is, Google is going to be super well positioned to be right in there and see exponential growth. But if the bubble ends up bursting, I still think that Google's got the cash cows and all their other businesses to outlast other casualties in this space.

**SPEAKER_1** (3:33)
Okay. And that exactly is what? The cash cow, just the whole thing.

**Geoff Nielsen** (3:39)
The cash cows is, we've got search. By the way, one of the areas that we haven't talked about yet is, I love their cloud business. Their cloud business is growing like crazy. I think it's graduated frankly from a growth story to a profit story. We've seen their revenue in the past year is up 82 percent. Their operating income is more than tripled. So this is an area that people aren't talking about nearly enough. It's competing with AWS and the best of them.