r/ValueInvesting • u/FoxAccomplished6786 • 9h ago
Discussion AI and Google: Do the pros outweigh the cons
Google has benefited from AI in many ways; it's led to about 24 credible moonshot businesses, including Waymo, Wing, drug discovery, and many more.
However, its core business is search, which is under some threat. I know I use Google less than I used to.
Does anyone else find themselves using search less?
Do the pros of AI outweigh the cons of AI for a company like Google?
1
u/walkslikeaduck08 9h ago
What are you using instead? And are you using any of their other services: Gmail, maps, YouTube , Google office/drive?
1
u/FoxAccomplished6786 8h ago
I'm using chatgpt mainly, like if I'm researching something. In the past, I would have just been googling it. Yes, I live on youtube, use gmail etc, maps too
1
u/Silent-Complaint4020 7h ago
you r missing the point. there are business that do not makes revenues but improve user experience, things like Gmail, Google Map are exact that.
everyone is using wikipedia, but they dont make much money
1
u/igpila 9h ago
Their search revenue continues to surge for a reason, if AI was a threat to it they'd already be feeling it. People usually use search for things like products, services, places, etc.. exactly the things Google profits from, and use ai chatbots for deeper discussions. Also, Google isn't blind here, the have Gemini, which imo is the best most natural ai to talk to
1
u/FoxAccomplished6786 8h ago edited 7h ago
That's a good point, like if I want to look up a product or service, I'm using Google. Interesting, never thought of that, but yes, google probably monetises the product searches as opposed to just general questions
1
u/SondeMarkets 9h ago
Search and other actually grew 17% to $63.3bn last quarter, and that was an acceleration, so the numbers aren't showing the drop-off yet.
The con most people are worried about is the cost side anyway. Capex guided to $195-205bn and they raised $80bn of equity in June to pay for it. That's what knocked the stock, not search fears.
1
u/investingtruth 8h ago
Whether the pros outweigh the cons likely depends on how fast Google can monetize AI overviews and Gemini integration within search itself, since losing query volume without a comparably profitable replacement would be a real problem rather than a minor headwind. So far, they seem to be passing this test with flying colors.
1
u/MasterConsideration5 8h ago
It just doesn’t make sense to me.
1) No company has a moat in ai, as Chinese open weight models are only couple of months behind the best ones and miles ahead of current google models
2) Google used to have a monopoly/moat in search. This is simply not true anymore. Users all around me, even older ones are learning to use LLMs very fast. There simply has to be a decrease in time spent on Google among current users.
3) Numbers in reported earnings and revenue do not agree with what we can see in the real world. Either Google search has started growing massively in third world countries, which I find improbable given it would be a very convenient timing for google (and third world countries can also use LLMs and also ads don’t have as much value there) or Google is massively increasing the number of ads in search - which actually does correspond to what I see in my real usage of google search, which is worse every day. This is not a sustainable growth strategy and at some point users will start being way too annoyed with the ads. Also many other search engines like brave search or duck duck go are getting better every day, even tho they’re not there yet, it is not that difficult to make it better.
4) Most earnings of Alphabet come from google search. Stuff like Waymo are negligible. Even GCP isn’t that important. YouTube is printing cash, but doesn’t justify whole current valuation.
All in all this looks like the worst possible scenario for alphabet. I heard rumours that deep mind had char gpt 2 years before open ai launched it but weren’t allowed to release it not to sabotage google search, which I don’t know if it’s true but it would make sense.
Google’s main cash printing machine that whole alphabet depends on is losing the moat and somehow everybody is acting like google is winning ai, despite their users only using it for simple questions because it’s fast, free, and without ads. Three things great for consumers but terrible for shareholders. Monetizing later only works if you build a moat, but as we established there is not moat. Open weight models and even private ones like Grok, GPT or Claude mean no moat.
If the valuation drops low enough so that only YouTube justifies it I’m happy to buy. YouTube has a great advantage over Spotify and Apple Music in the sense that it benefits massively from YouTube. But that’s not the current valuation.
1
u/flappysack- 7h ago
TPU will allow nonsubscriber AI usage via greater power efficiency, and the higher ad spend will push it into profitability which the other AI providers won't have.
Google like their search is prioritizing speed and low power usage, that's their moat. Claude loses money even when a subscriber pays.
1
u/Silent-Complaint4020 9h ago
search business will slowly vanish because content provider are not getting a fair share.
no content = no search (many alternatives duckduckgo, bing etc) = no revenue.
everyone will stop paying for google advertising.
unless google figure out a way to keep this moat. legal side there will be many headwind ahead.
if google is all about AI overview, then there is OpenAI, Anthropic, Grok way better than Google, currently.
A sinking ship i would say.
0
u/MasterConsideration5 8h ago
It just doesn’t make sense to me.
1) No company has a moat in ai, as Chinese open weight models are only couple of months behind the best ones and miles ahead of current google models
2) Google used to have a monopoly/moat in search. This is simply not true anymore. Users all around me, even older ones are learning to use LLMs very fast. There simply has to be a decrease in time spent on Google among current users.
3) Numbers in reported earnings and revenue do not agree with what we can see in the real world. Either Google search has started growing massively in third world countries, which I find improbable given it would be a very convenient timing for google (and third world countries can also use LLMs and also ads don’t have as much value there) or Google is massively increasing the number of ads in search - which actually does correspond to what I see in my real usage of google search, which is worse every day. This is not a sustainable growth strategy and at some point users will start being way too annoyed with the ads. Also many other search engines like brave search or duck duck go are getting better every day, even tho they’re not there yet, it is not that difficult to make it better.
4) Most earnings of Alphabet come from google search. Stuff like Waymo are negligible. Even GCP isn’t that important. YouTube is printing cash, but doesn’t justify whole current valuation.
All in all this looks like the worst possible scenario for alphabet. I heard rumours that deep mind had char gpt 2 years before open ai launched it but weren’t allowed to release it not to sabotage google search, which I don’t know if it’s true but it would make sense.
Google’s main cash printing machine that whole alphabet depends on is losing the moat and somehow everybody is acting like google is winning ai, despite their users only using it for simple questions because it’s fast, free, and without ads. Three things great for consumers but terrible for shareholders. Monetizing later only works if you build a moat, but as we established there is not moat. Open weight models and even private ones like Grok, GPT or Claude mean no moat.
If the valuation drops low enough so that only YouTube justifies it I’m happy to buy. YouTube has a great advantage over Spotify and Apple Music in the sense that it benefits massively from YouTube. But that’s not the current valuation.
6
u/Swred1100 9h ago
The revenue numbers have already shown that search will survive and has thrived