Google Deep Dive: Will It Shit the Bed?

MARKETS

Google Deep Dive

Today, I’ll prove to you that nobody, and I mean nobody, is better positioned than Google to win the AI race. But if history has taught us something about this company, is that it can’t be trusted.

From being extremely politically biased to censoring accusations of pedophilia to protect certain YouTube stars, Google has a long history of shitting the bed.

So, the question is, will Google repeat the embarrassment of the last few years or emerge as the absolute winner?

All in all, this is a 15-minute, heavily researched, up-to-date snapshot of Google’s present and future, providing all the information you need to decide whether this is a winning business… or a disaster waiting to happen.

But why should you care? Understanding Google’s future is mandatory if you’re an investor. However, Google’s cultural impact makes it mandatory for anyone willing to understand how AI and the world work, as:

these people hold the key to what content you see when you search the web,

they also decide what content your kids see in their free time,

what restaurants appear on your GPS screen,

and even hold the key to the future of entertainment.

This is the story of the company whose biggest enemy, as you’ll see today, lies within.

The Current Picture

Before focusing on Google, we need some situational awareness regarding markets, which are going crazy.

What is going on?

The Great Rotation

The Russell 2000, the US small-cap index, has grown almost 11% over the last month, while the S&P500, the large-cap index, has fallen 0.43%.

It doesn’t seem that obvious of a rotation, but things become clearer when you look at the Magnificent Seven (Apple, Amazon, Google, Microsoft, Meta, Tesla, and Nvidia), as these have fallen 30% over the same period.

Adding insult to injury, famous investor Tom Lee thinks the S&P500 will be flat for August and that small caps could rise an extra 15%.

Please be aware this is not financial advice, these investors are seldom correct; I share this to exemplify the current market sentiment.

Other famous investors such as Steve Eisman, one of the few people who predicted the housing market crash 16 years ago and made huge amounts of money (Steve Carell even portrayed him in the cult film The Big Short), claimed we were in a ‘psychological rotation.’

Money is flowing out of stocks like Google and into small companies. There are many reasons why this may be happening:

As Eisman mentioned, people might feel uncomfortable with having such a large chunk of their portfolio on 7 companies that, combined, account for 31.3% of the S&P500 index at the time of writing, and with Apple alone being as big as all 2000 small-cap companies in the Russell index combined.

All the Mag7 companies boast large CAPEX expenditures in Generative AI, with no apparent returns.

According to prediction markets, the strong inflation data from June 2024 might suggest the start of a cycle of interest rate cuts…

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