The problem with Google is that they are basically run like a group of engineers.
The business execution is terrible. They had the lead in self-driving. Nothing has come of it.
They had the lead in AI, came up with many ground breaking pieces of research including the Transformer archictecture which is now the core technology of pretty much all hyped AI, AND on top of that they have for many years invested in their own silicon so they are not struggling so much with the Nvidia/hardware squeeze, yet they have failed to capitalize on it financially.
What Google needs is a business focussed leader at the helm to convert technology into profitable businesses.
Frankly, the best thing that could happen to Google is for Microsoft to buy them (impossible for anti-trust and other reasons) and turn them into an R&D center.
First take: salt rubbed gently into well deserved wounds.*
Second take: itâs complicated. I remember Larry Page taking the stage at a TGIF** (maybe 10 years ago or so) explaining himself that he was in tears after reading a Nikola Tesla biography, learning that despite Nikola Teslaâs genius in science, he ended up broke economically. Larry then vowed that he would never let Google end up in such a situation, and extended that to the Google he was leading at the time (IIRC even as a CEO), the future was so bright that you needed darker shades.
Third:
Despite all of these engineers lightening up shareholder cash at Google, Iâm actually hesitant to support your demand to pass the torch to a âbusiness focussed leaderâ at Google. I donât think there are any business focussed leaders who understand the âbusinessâ. I also donât think there are any engineers who understand âthe businessâ.
NVDAâs CEO currently rides the crust of that wave - understanding both - but that wave will crash.
In fact, I wonder if itâs mutually exlcusive to have leader who have the business and technical understanding.
Genuinely.
* I am personally a physicist, so mostly immune to salt painful in engineersâ wounds, but I can imagine what engineers will feel like.
** A Friday evening company wide meeting with a presentation or two and the founders taking questions at the end. TGIF: Thank God Itâs Friday.
Musk dreams up to do something. Musk puts his prodigious intellect, cash and focus on that something, achieves it, then gets bored and moves on. Thatâs about it in my opinion.
Iâve been following him for a few years, in particular the neuralink and starlink stories, I think this is what really floats his boat. Will certainly buy into either when they become public.
Valuation for TSLA has been a strech for a long time, especially comparing it with âlegacyâ automakers (which do in fact quite well in terms of cash flow generation). I believe TSLA will face headwinds as long as Musk is not fully and in his entirety focussing on TSLA (and not on X, Space X, external AI company, etc). am very pessimistic in the short term. Sell
I understand your comments. But I donât think itâs fair to say that an almost 2 Trillion dollar company doesnât know how to build business or doesnât have business focus.
Heck, I think Steve Ballmer would do a better job - he wouldnât necessarily be very creative, but heâd at least squeeze the juice out of the existing assets.
Iâm not sure that you even need a leader that understands the technology - you just needs someone to push things along. Google should already have their self-driving technology in millions of cars - maybe not fully self-driving, but at least doing basic stuff and collecting data for them to develop AI and building out sales channels.
Google is too cautious and too theoretical/idealistic. OpenAI just took their lunch and ate it in front of them and Google are still floundering.
Itâs lucky that they have their core advertising monopoly. Lucky for them that continues to bring in money. And lucky the regulators donât understand the business either, else they wouldnât have allowed them to acquire DoubleClick etc.
It amazes me that the FTC wasted time on nonsense like the MS acquisition of ATVI when they should be busy breaking up Google to separate the ad buy side, sell side.
Talking about google, I am very pessimistic about their outlook. They were leading the field a few years ago but I feel them falling back big time. Search will be disrupted in the next 5-10 years (AI enabled search & advisory). Advertising will get under even more pressure (data protection & Apple), their office suite sucks as they just donât solve bugs in time⊠so what is left? Cloud but there we talk about a commodity business with low margin and fierce competition. So what is left for Google - youtube?
Over the next five years Iâll take Microsoft any time against TSLA.
I donât expect an incredible performance from Microsoft (best case maybe 15% per year seems reasonable). But all it has to do is not to implode the way I expect TSLA to do.
As of this writing:
TSLA : $157.46/share
MSFT : $412.58/share
For those having difficulties making up their mind, I have a hammer called FASTgraphs and to me every problem looks like a nail.
Hence hereâs some FASTgraphs taking into account analystsâ earnings estimates for the next couple of years for the magnificient 7 and the end of 2027 price target if each company stayed at the multiple of yesterdayâs close:
Damn, I knew there was a catch, even if you take the analystsâ estimate for granted.
So, which horse should I bet on, based on the charts? Is the bet still open, at all?
Without the fee (ok, even with the fee) Iâll say this: this isnât my terrain, as it seems pure speculation. I try to stay away from investments or even bets where I canât build my own and enough conviction.
Appleâs too expensive for their expected growth. The appropriate (P/E) multiple for their growth is 15, and theyâre at 26.
Pass.
Amazonâs growth look spectacular, but even for their appropriate multiple (30), theyâre overvalued.
Pass.
Alphabetâs case is the same as Appleâs (plus the concerns mentioned above).
Pass.
Metaâs growth justifies an about 20 multiple, theyâre at 30. Overvalued.
Pass.
Microsoftâs growth justifies a 16.5 multiple. Theyâre at 37. Overvalued.
Pass.
Nvidiaâs growth justifies a 30 multiple. Theyâre at 57 (!). Severly overvalued.
Pass.
Taking into account that Teslaâs almost as overvalued as Nvidia but has no real growth to show for, Iâd probably tag along with @Julianek because of M$'s moat and even ignoring the AI hype intact growth opportunities with Cloud. They feel a little bit like theyâre becoming a Coca-Cola, established brand, an even better moat (good luck moving corporate America and most of the rest of the world away from Windows and Office) and investors are willing to pay a premium for the company.
Iâll bet on Apple, then. If multiples donât help, I apply an alternative method: From the products and services I use(d), the ones from Apple caused me the least frustration. Excluding Tesla, I donât drive one, yet.
Given the timespan of the bet (5 years) and the average user turnover on this forum, there is too much risk that any of us wonât be there in 5 years to honor this bet.
What I suggest instead:
Letâs do a 5-year swap, settled monthly, on the relative performance of MSFT vs TSLA
notional of the swap is 100CHF
Leg 1 of the swap is Microsoft performance, dividends reinvested
Leg 2 of the swap is Tesla performance, dividends reinvested
initial fixings for both stocks is a written in my former message (TSLA: 157.46 USD, MSFT: 412.58USD)
Being long the swap means receiving MSFT performance and paying TSLA performance. Being short the swap is receiving TSLA performance and paying MSFT performance.
The swap is settled monthly and expires after 5 years. Both participant can choose to exit the swap during its lifetime after having settled the past month performance.
Example:
Bob is long the swap, Alice is short it.
on month 1, MSFT goes up to 433.21 USD and TSLA up to 163.76 USD. Compared to the initial fixings, thatâs 5% for MSFT and 4% for TSLA. Netted, this is a 1% relative perf for Microsoft. Alice pays 1% of the notional, i.e 1% * 100CHF = 1 CHF to Bob.
On month 2, MSFT goes down to 420.83 USD and TSLA goes up to 165.33 USD. Compared to the initial fixings, thatâs a total perf of 2% for MSFT and 5% for TSLA. So a net advantage of 3% for Alice. But because Alice had paid 1% in month 1 to Bob, Bob has to settle 4% of the notional to Alice.
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Is the bet still open, at all?
If multiples donât help, I apply an alternative method: From the products and services I use(d), the ones from Apple caused me the least frustration. Excluding Tesla, I donât drive one, yet.