71–80 of 247 posts
It’s difficult to avoid the feeling that a horrible financial reckoning is on the way. All these big tech firms are spending wildly to make sure they are the one on top at the end of it all. But whoever that ends up being there’s going to be one hell of a lot of fallout underneath them.
Like how the early railroads or oil companies shook out and cost more than expected.
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It's more that they know they can eventually clone any successes the other companies have and steal their market share. Their really is no moat. In a more normal environment they would be buyout candidates but that's a bit too far gone at this point, so you just let them run until they are out of gas and Google can benefit from any advances without upfronting the cost. Even with anthropics record breaking revenue gro…
> they know they can eventually clone any successes the other companies have Google has gone all in on AI. To the point of challenging their own core product. Apple is waiting and seeing. Google is building and distributing, albeit with terrible marketing.
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maybe it is wrong to spend 200B every year continuously to begin with.
Also I don’t think any of these companies has handled big capex programs in the past (maybe AWS a bit since Amazon is building things, but it did so incrementally), aka they don’t have the institutional knowledge to manage the risk associated with it. Semiconductor/ Big Oil/ Rail/ Telco have.
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Why? There’s $80B of dilution from new shares issued, so to keep share prices constant market cap would have to increase by $80B. Simultaneously, there $80B in additional assets on the balance sheet, so if the company was previously correctly valued at $N market cap it would now be correctly valued at $N+$80B market cap, right? My intuition is that capital raises, just like stock buybacks, should be first-order (“mec…
Ok but GOOG also has a ~$70B per year stock buyback program for that. It's a little goofy to be buying back and issuing $80B of new shares at the same time.
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Also I don’t think any of these companies has handled big capex programs in the past (maybe AWS a bit since Amazon is building things, but it did so incrementally), aka they don’t have the institutional knowledge to manage the risk associated with it. Semiconductor/ Big Oil/ Rail/ Telco have.
If you're going to bring up CapEx, Cloud is entirely a CapEx vs OpEx play so AWS and GCP are entirely familiar with the risks there. AWS dates back to 2006 and Google was building data centers long before GCP was public. Smaller, sure, but their finance team understand CapEx and OpEx well.
I can invest perfectly in an always up market.
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In theory a buyback is price neutral. The company has less cash in the balance sheet, so its market cap decreases. But there are fewer shares, so the share price is the same. (This allows hypothetical future growth to disproportionately benefit existing shareholders, but does not intrinsically increase stock price.) In practice, like another poster pointed out, it signals the company’s belief that its own shares are…
In theory a dividend is also price neutral. You have the dividend now but the company you owned doesn't any more. However, if someone gives you a dividend you typically have to pay tax, and lots of people really hate paying tax. So buybacks are the preferred price neutral way of dealing with excess cash.
But before-paying-dividend versus after-paying-dividend decreases the value of a share.
Quoting: In addition, Alphabet has reached an agreement to sell $10 billion of stock to Berkshire Hathaway Inc. in a private placement, comprised of $5 billion in Class A Common Stock at a price of $351.81 per share and $5 billion in Class C Capital Stock at a price of $348.20 per share. This investment by Berkshire Hathaway adds to the position it has built since Q3 2025.
It's genuinely interesting to see Google fund this with equity versus debt.
Tech firms should always have a buffer and never get too close to the optimal debt ratio.
I think they have learned a lot re. what happens if you are asleep at the wheel now.
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It's genuinely interesting to see Google fund this with equity versus debt.
Really? lol. Tech firms should always have a buffer and never get too close to the optimal debt ratio. I think they have learned a lot re. what happens if you are asleep at the wheel now.
Yes. Their competition is deploying debt and Google has low leverage. They also have $100+ billion cash on their balance sheet.
> Tech firms should always have a buffer and never get too close to the optimal debt ratio
...why is this especially applicable to tech firms? (Or a tech firm like Google?)
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If you're going to bring up CapEx, Cloud is entirely a CapEx vs OpEx play so AWS and GCP are entirely familiar with the risks there. AWS dates back to 2006 and Google was building data centers long before GCP was public. Smaller, sure, but their finance team understand CapEx and OpEx well.
I don’t think I agree. Cloud has not faced (yet) a serious downturn. I can invest perfectly in an always up market.
2008 wasn't a serious downturn?
Quoting: In addition, Alphabet has reached an agreement to sell $10 billion of stock to Berkshire Hathaway Inc. in a private placement, comprised of $5 billion in Class A Common Stock at a price of $351.81 per share and $5 billion in Class C Capital Stock at a price of $348.20 per share. This investment by Berkshire Hathaway adds to the position it has built since Q3 2025.
They know Google has a ton of data to train LLMs on. Recently I have been asking YouTube's new AI about some videos ("when is Steam metrics mentioned in the video?" for example), which means they also index videos. This is an unthinkable amount of data. I'm actually impressed at how bad Alphabet is with LLMs since they invented the thing as we know AND have all the data to train on, yet OpenAI and Anthropic are eatin…