Alphabet
Thesis
- The business: an advertising auction to finance an AI infrastructure build.
- Unit economics: one paid click and one contracted accelerator hour.
- Moat:
- Advertising: click-relevance feedback Loop, owned distribution (Android and Chrome), self-designed accelerator.
- Vertical integration: full stack cloud position - models, TPU, data centers, renewable energy developer (Intersect).p
- Data, infrastructure scale & cost leadership.
- Earnings drivers: Search and other, Google Cloud, depreciation.
- Growth drivers:
- Alphabet is losing share of advertising while gaining share of cloud (and improving margin).
- Cloud backlog. Search volume. Consumer subscriptions (Google One and YouTube). Merchant accelerator.
- External investments: SpaceX and Anthropic.
- Risks:
- Search query growth is not enough to offset AI cannibalizing paid click.
- Cloud utilization disappoints against fixed depreciation and increasing dilution.
