Hello, Reader.
Alphabet Inc. (GOOGL) has certainly been cooking. On Tuesday, the company unveiled plans for its new AI chip dubbed Axion.
The central processing unit (CPU), based on Arm architecture, promises superior performance compared to existing general-purpose Arm CPUs currently available for cloud computing.
Specifically, Axion boasts up to 30% higher performance than current top Arm cloud instances – and up to 50% better performance and 60% improved energy-efficiency compared to the structure used in Intel’s x86 chip.
“I see this as a basis for growing the size of the pie,” emphasized Google vice president Amin Vahdat.
Rather than sell Axion directly to customers, Google will start out using it in its AI data centers. A roll-out to Google Cloud’s business customers will come later this year.
Google Cloud Vice President Mark Lohmeyer echoes Vahdat’s sentiment, claiming, “We’re making it easy for customers to bring their existing workloads to Arm.”
In part in response to Google’s new chip, Nvidia Corp. (NVDA) shares dropped 10% from their all-time high on Tuesday. While there’s no need to be concerned about Nvidia, the big one-day drop underscores Alphabet’s advancements and growth trajectory.
The company is set to release its first-quarter earnings report for fiscal year 2024 on April 10. So, ahead of its upcoming earnings report, let’s take a look back how Alphabet has performed, its other AI initiatives, and its prospects for investment.
Not so Magnificent?
Alphabetis one of the big companies spearheading the AI boom, but it hasn’t been upholding its “Magnificent” name this year.
Although the company reported record fourth-quarter revenues and profits on January 30, that impressive result left many investors unimpressed. The stock dropped a quick 8% on that news and struggled to recover.
Even so, the company continues to mint money.
During the fourth quarter of 2023, the tech giant posted revenues of $86.3 billion – up 13% year-over-year. That result lifted full-year revenues to $307 billion, a 9% improvement over 2022. Net income surged 51% for the fourth quarter and 23% for the full year.
Every major segment of the company contributed to these robust gains. During the fourth quarter, revenues at…
- Google Search and Other Advertising grew 13%
- YouTube Advertising jumped 16%
- Subscriptions, Platforms, and Devices surged 23%, primarily reflecting growth in YouTube subscriptions
- And Google Cloud improved 26%
These results demonstrate Alphabet’s strong momentum, as it battles to strengthen its competitive position in the AI era.
AI in Action
The company closed out the year by launching Gemini, one of Alphabet’s answers to ChatGPT and other generative AI bots.
As CEO Sundar Pichai explained on the fourth-quarter earnings call…
It’s engineered to understand and combine text, images, audio, video, and code in a natively multimodal way, and it can run on everything from mobile devices to data centers…
By applying generative AI to Search, we are able to serve a wider range of information needs and answer new types of questions… People are finding it particularly useful for complex questions, like comparisons and longer queries. It’s also helpful in areas where people are looking for deeper understanding, such as education or even gift ideas…
Then there is Bard, our conversational AI tool that complements Search. It is now powered by Gemini Pro and is much more capable of things like understanding, summarizing, reasoning, coding, and planning.
Alphabet also beefed up its AI capabilities across the Google Cloud platform that serves its business customers.
Its “AI Hypercomputer” is a supercomputing architecture that combines leading-edge processing power with AI software, to enable businesses to train and serve AI models. Customers like Anthropic, Character AI, Essential AI, and Mistral AI are using this Google Cloud platform to build and serve their AI models.
For 2024, Wall Street analysts are predicting another exceptional year of growth, with earnings per share growing about 15% to nearly $7 per share. If the company hits that mark, it would be trading for less than 20 times earnings.
Although that valuation is not classically cheap, it is certainly not a “crazy” valuation for one of the most dominant AI tech companies in the world. For perspective, NVDA stock is trading for about triple the valuation of GOOGL.
As the tech giants continue battle it out for dominance in the AI landscape, there’s a pressing matter right on our doorstep…
Hundreds of millions of people are about to find themselves on the wrong side of a great flood of destruction unleashed by artificial intelligence.
And this isn’t happening far-off in the future. In fact, it has already started.
That’s why I’m issuing an urgent AI Code Red.
If you want the chance to end up on the winning side of the growing wealth gap…
Click here for all the details.
Regards,
Eric Fry
