Brigati: GOOGL Has Opportunity to Take NVDA Market Share

SPEAKER_1 (0:00)

Joining me for this conversation, Chris Brigati, Chief Investment Officer at SWBC. I'm so glad you are with us. So, we think about the MAG-7, we've talked a lot about Nvidia and Apple now at new highs, but let's focus here on the alphabet. I mean, I know it had a sell-off after its earnings a real gap down in that chart, but it's been on an uptrend lately for this month, about 5.5% higher. What say you about GOOGL?

Chris Brigati (0:29)

I think the interesting thing to keep in mind with alphabet is the fact that they still have this very big AI presence and they're really dedicating a lot of resources and their capex spending is kind of towards the higher end of the range for all the mag-7s. One of the thoughts is how are they going to continue to build and grow and develop?

All the concerns about capex spending in the past week or so were along the lines of, can the capex spending lead to the profit and the revenue growth for these technology companies that we would hope and need and expect to continue the trajectory? And that was the pullback that we recently saw. So we need a little bit of a wood to chop in order to figure out where we're going next.

SPEAKER_1 (1:07)

So a lot of capex spending and the market seemed to run hot and cold on companies that are spending or too much spending. It depends on the day of the week, how they digest that. But I mean, in theory, I guess people would think there may be a bit of a slow down, maybe capex would slow down. But does Google have the opportunity, Alphabet, have the opportunity to take market share from the likes of Nvidia or anybody else? What kind of position do you think it is in the longer term?

Chris Brigati (1:34)

I think they certainly have the opportunity to capture a little bit of market share, kind of the mentality of don't let a good crisis go to waste. If they can capitalize on some of the opportunity presented by the fall off and the potential problems that Nvidia might have with their chip making, they can certainly pick up some share.

SPEAKER_1 (1:52)

Okay, and then when I think about some of the strategies that they're using, I mean, it's interesting. For example, yesterday, I reported on Gemini glasses with Warby Parker, right? Warby Parker stock was up 20 percent. Now we'll have the Gemini glasses with translation. This is just one thing. But they'll have translation and directions and photos. We saw Ray Bans and Metta doing this.

How's the competitive landscape for Google? Can they really, are they late to the game? I mean, there was concerns about search. Are they well positioned?

Chris Brigati (2:25)

They're relatively well positioned. I am a little concerned about the search engine revenues. Their ad revenue has kind of fallen off a little bit lately, despite the fact that the search engine use is at an all-time high. So there's kind of conflicting things that could happen there. So they need to write that ship a little bit. I'd say it's a little bit of a yellow flag for that part of the business, but it also is a good thing that they have the opportunity to have a different revenue stream other than some of the traditional capex spending heavy type of businesses that they're trying to engage in.

SPEAKER_1 (2:53)

Yeah, so you feel like they have a favorable outlook. Would you say that about the whole MAG 7 because it's a tech story?

Chris Brigati (3:00)

I wouldn't say all of them have the same opportunity going forward, and I think it's kind of funny to use this word, but I'd say that alphabet might be the value play within the MAG 7 space. Kind of funny to say that for growth companies, but ultimately I think they represent right now the best overall value. I don't think the value is completely bottomed out yet though. I think we could have some more pullbacks in the technology trades going forward, so I'd look for that in sort of a buy the dip mentality approach.

SPEAKER_1 (3:27)

When we think about its legacy, I mean, search was really it, right? So what else is it going to be? How does it transition into now and the future?

Chris Brigati (3:39)

I think if they can take a market leading share in the technology aligned with the data center expansion, they can really set their flagpole in the ground and really drive things going forward. So I think they have that opportunity because they do have a massive balance sheet. They are spending a lot for the CapEx spending. So the opportunity for them is there. It's a matter of can they capitalize on that? Can they pick up market share from the likes of Nvidia? Those are questions that remain to be seen and I'm hopeful that we can get some of those answers in the relatively near future.