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Who let the dogs out? Shares of Google parent Alphabet, which was in Wall Street’s doghouse for the past couple of years, are now running freely. Friday night’s news that Warren Buffett’s Berkshire Hathaway had bought a $4.3 billion stake in Alphabet sent the shares rising 3% on Monday, even as other tech stocks sagged amid a broader market sell-off. It was the latest piece of good news for Google, whose shares have been rallying since the company’s essentially scot-free escape from antitrust hell this summer. The stock is now up 50% year to date, a better performance than any other big tech stock has enjoyed.
This isn’t just about antitrust, though. More people seem to be recognizing Google has figured out AI, after a rough start. (That perception is likely to be reinforced when the company unveils its latest AI model, Gemini 3, expected any day now.) Other data points highlight Google’s progress, including the popularity of the TPU, Google’s internally designed AI chip, and accelerating growth of Google Cloud. All this points up a reality that should have been obvious. While we in the news media breathlessly report on every step Sam Altman takes to make OpenAI a vertically integrated AI giant, Google is already there.
Google has a top-notch large language model (developed by an equally top-notch research lab); a well-established cloud firm and a highly regarded AI chip of its own design. It owns the dominant web browser and search engine, which has incorporated AI into its answers. While OpenAI is trying to build devices that people can use to access AI, Google already has the Pixel smartphone and (maybe soon) smart glasses. OpenAI’s ChatGPT is well ahead of Gemini in usage, to be sure, but OpenAI is also bleeding billions and expects to do so for years. Google, well, isn’t. Its cash generation and balance sheet strength means it’s well positioned to pay for the necessary AI investments in the next few years—unlike OpenAI.
Of course, none of this means Google is maximizing its collection of assets. As a giant company with 190,000 employees, it’s been marred by dysfunction, slow decision-making and fiefdoms. Perhaps it is succeeding in AI in spite of itself. Whatever the reason, there’s an argument that investors betting on OpenAI might be better off buying stock in Google.
Meta’s Slump
What must make Alphabet’s recent rally particularly sweet for the folks in Mountain View, Calif., is that it’s been accompanied by a stampede of investors out of Meta Platforms stock. Until the summer, they strongly favored Meta over Google. In late July, for instance, Meta shares at that point were up 32% for the year, while Google stock was up 1.5%. Those positions have now reversed: Meta shares are up just 3% on the year, while Google stock is up 50%.
We know what happened to Google. Investors fled Meta after the social media firm announced in late October a further ramp-up in AI investment next year. Since then its shares have plunged 20%. The trend continued on Monday. Meta shares fell 1.2%, and were trading down in after-hours trading.
In Other News
• Amazon founder Jeff Bezos has co-founded a new AI startup that he will lead as co-CEO, The New York Times reported Monday.
• Amazon is expected to raise $15 billion in a bond offering, Bloomberg reported, the latest sign of how big tech companies are tapping the debt markets to help fund enormous investments in AI.
• Sakana AI, a Tokyo-based developer of AI models and applications, said it has raised $135 million in a funding round at a valuation of $2.5 billion without the newly raised capital.
• Online marketplace Faire announced a tender offer Monday to buy employee shares at a price that values the company at $5.2 billion, nearly 60% lower than the company’s last public valuation of $12.6 billion from mid-2022.
Today on The Information’s TITV
Check out our latest episode of TITV in which Akash speaks with 1Password CEO David Faugno about whether AI is net good or net bad for cybersecurity.
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