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There Are Three Options For Alphabet (GOOG) Shareholders Today, and Number Two Is The Worst

Austin Smith

Published: December 19, 2024 10:59 am

Key Points:

• Alphabet’s (NASDAQ: GOOGL) new AI chip suggests possible combination of quantum computing with artificial intelligence, challenging NVIDIA’s (NASDAQ: NVDA) dominance.
• Thanks to their enormous financial resources, mega-tech companies like Alphabet and Amazon (NASDAQ: AMZN) are able to produce rival hardware exactly specified to their needs
• Even if NVIDIA is still powerful, prior events like Intel’s collapse highlight the frailty of industry giants facing revolutionary technologies or new competition.
• After an incredible year, many investors are looking at 4% (or better) yields in savings accounts to keep their money safe when volatility returns.
• See our top pick for the best high yield savings account today. (Sponsor)

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Transcript:

[00:00:00] Lee Jackson: One of the things that I think that’s interesting is, and we did do do a big segment on on, big tech coming after NVIDIA, NVIDIA, and boy, this Google Alphabet Willow chip looks like it’s something big, real big. Now, they’re talking about, you know, merging quantum computing with A. I. And even going down the road that that maybe maybe we’re somehow in the matrix and there’s parallel universes and they think they could perhaps demonstrate that at some point. Oh, is this going to spell doom and gloom for NVIDIA in a couple of years?

[00:00:45] Douglas McIntyre: Well, it’s certainly caused, the stock to rally. Alphabet, when that news came out and, you know, you have to make a decision if you want to be an alphabet Sheryl, because there are three scenarios, right?

[00:00:59] Douglas McIntyre: First scenario is it gets broken up, regardless of what else happens and probably the browser business Chrome gets

[00:01:05] Lee Jackson: right. And they’re probably okay with that.

[00:01:09] Douglas McIntyre: Well, that becomes the old AT&T (NYSE: T) argument when it was broken companies. Were you better off selling AT& T or were you better off holding the pieces? Most of the years after that, not all of them, but most of the years you were better off not taking your pieces and keeping them. your

[00:01:29] Lee Jackson: because they ultimately got rolled into, for instance, what is now Verizon (NYSE: VZ) was like Bell Atlantic, you know, and some of those other ones that so they all got rolled in and literally got bought again.

[00:01:41] Douglas McIntyre: So that’s number one, that’s a justice department fight, which who knows whether they’re they’ll win or not. Scenario two is the two scenario two is the doomsday scenario for And that is, is the Google’s market share gets killed, killed by applications that you can run on your phone or your computer. Many of

[00:02:05] Lee Jackson: right,

[00:02:06] Douglas McIntyre: So people will say, particularly young people, you know, I like, the AI apps that I’ve got on my phone. I’m not going to use Google anymore. So that’s the doomsday scenario, right? Scenario three is your scenario. And that is, is that they jump out, they leapfrog. Nvidia, or they become competitive with it. if I’m going to now move over to something, if that happens, Nvidia stock is going to nosedive. If somebody discovers that’s true. then all of a sudden Google has the most advanced search. They have quantum computing they’re competing in hardware with Nvidia. And they have a decision to make then.

[00:02:50] Douglas McIntyre: Did they keep that? That chip, do they keep it for themselves because they want that competitive advantage or do they start to license that? That, but that’s too complicated. That’s a long way down the road. So you

[00:03:01] Lee Jackson: Yeah. And it’s a long way. It is a long way down. And again, it’s, it’s in the initial stages, but I mean, capabilities and, and the amount of like transistors on the chip for like a trillion versus 4 million, or those may not be the correct numbers, but it was some stunning, stunning, you know, comparison like that.

[00:03:21] Lee Jackson: I’m just like, How did that come out of nowhere? And then all of a sudden it’s, it’s in, in production or, you know, it’s a work in progress.

[00:03:30] Douglas McIntyre: Well, it brings up another issue and that is chasing and Nvidia people say, well, it’s AMD. Well, guess what? It actually may be Alphabet. Amazon, it may be these other mega tech companies that can find, who can, who can find the people to build not just AI systems, but you know, most of these companies do have significant hardware expertise. So you’re now going to Apple. now going to see whether or not these mega tech companies who have infinite balance sheets, money is no object.

[00:04:13] Lee Jackson: The deepest pockets on the planet.

[00:04:14] Douglas McIntyre: Yeah, absolutely. So can they basically build the teams that are necessary these? If so, is a cell. If there’s, if you believe that premise, then maybe it isn’t a cell tomorrow, but it’s not a long term hold.

[00:04:32] Douglas McIntyre: If

[00:04:32] Lee Jackson: But it will be at some point. Sure. No, but as we’ve discussed over and over, 10 years ago, nobody ever thought Intel would be a hard sell.

[00:04:42] Douglas McIntyre: no,

[00:04:43] Lee Jackson: Now is at the bottom of the barrel. I mean, things can change and, and despite, and, you know, I remember there was a point when people say, Netflix, this is never going to work.

[00:04:52] Lee Jackson: This is never going to work. And then they stopped sending out CDs and started streaming. And it was genius. It just, it just took off.

[00:05:02] Douglas McIntyre: And remember 10 years ago, nobody knew what NVIDIA was. It was making, you know, I think graphics chips for gamers or

[00:05:09] Lee Jackson: chip for gaming applications, which were, which kept them in the game because they were almost, I mean, for, I would, I would suspect that back in 2010, 2011, 2012, back in there, I bet it was 2. I don’t even think it was a 3 stock, you know, it was, it was a single digit midget. And then the, the chip for gaming kept them in the game until they came up with the AI.

[00:05:33] Douglas McIntyre: Yeah.