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I am invested in some of the companies that are downstream of the capital expenditures of Big Tech (e.g., COHR), so I have nothing to complain about. I am real

I am invested in some of the companies that are downstream of the capital expenditures of Big Tech (e.g., COHR), so I have nothing to complain about. I am really struggling to see what's the investment thesis behind Google valuation increasing 2x in response to AI, though. Assuming no magical AGI singularity, by the end of the day, they're still selling the same services, but the services have gotten more expensive for them to provide. Everyone was already using Google Search, but now, provisioning AI summaries on top of requires more compute. Everyone was already using Google Docs and Meet, but now, AI features cost Google more. Etc, etc. The only place where they stand to make money is selling AI compute to enterprises. But with the current supply-chain challenges, the margins there are probably getting thinner.

solumunus 3mo ago
The market runs on memes, hype and fraud. Fundamentals haven’t mattered for a long time.
- senordevnyc 3mo ago
  I guess Google’s Q1 earnings of $62 billion were just hype.
  - ponkpanda 3mo ago
    Yes, earnings are essentially hype/BS. Focus on cash/cashflow.
    - kaonwarb 3mo ago
      $64B trailing twelve months free cash flow. (https://s206.q4cdn.com/479360582/files/doc_financials/2026/q1/2026q1-alphabet-earnings-release.pdf https://s206.q4cdn.com/479360582/files/doc_financials/2026/q...)
      - ponkpanda 3mo ago
        That's trailing and mighty impressive. However when you decided to quote Q1 earnings. $62bn of Q1 earnings ends up at only $10bn. The LTM numbers are less relevant. AI-related capex is one hell of a drug.
        senordevnyc 3mo ago
        The discussion here is whether Google can make money in the AI world. They obviously can. Whether they turn around and spend that money on capex to try and increase future earnings is irrelevant.
        torginus 3mo ago
        Yeah, but I think the recent explosion of both memory prices and stock prices of memory makers highlight that datacenter GPUs cost about 10x as much as the would in a healthy supply-demand situation. Gaming equivalents of datacenter GPUs (I know they are not the same, but those had a hell of a lot of compute and bandwidth) cost less than 1/10th when normalized to FLOPS. So its scarcity pricing. If a paper were to come out tomorrow proving that additional compute has diminishing returns, there would be hell to pay in markets.
  - zerobees 3mo ago
    And a market cap that exceeded 4.5 trillion dollars. I think we can all agree that Google is a legit business. But they were doing fine in 2023 too and had solid y/y revenue growth for much of their history. Their market cap tripled since 2023 and doubled since mid-2025. So, it's clearly more than "they continue to be a profitable company that grows around 15% y/y in real terms".
- neogodless 3mo ago
  You're half right. The market sets prices, and they are set based on multiple things. One of those is fundamentals. Consider the value of assets, whether tangible or intellectual property, human resources, binding contracts, etc. that add up to reasonable revenue forecasts and so forth. And the other aspect of prices is based on conjecture, speculation, meme-joiners, believing hype, and in some cases, fraud. The secret sauce is always going to be the one who can figure out, between the two factors going into price, what's right, and when. BUT... just saying that all stock market pricing is based on unreliable factors? That's not a useful, actionable statement. You can certainly stay out of investing in that market, but is that going to be your best course of action?
haberdasher 3mo ago
`I am really struggling to see what's the investment thesis behind Google valuation increasing 2x in response to AI` Google is basically Nvdia (TPUs), Tesla (Waymo Self-Driving), Hyperscaler, Netflix (YouTube) and a massive VC (Anthropic, Databricks, SpaceX, etc.) all rolled into one. Their valuation isn't really a 2x'ing so much as a reversion from halving.
- cik 3mo ago
  It's frequently said that vonglomerates usually carry through as their valuation, the multiplier of the lowest holding. If that's the case, Alphabet is worth more broken up. Similarly that makes their current valuation (and nay any valuation) theoretically too low.
deleted 3mo ago
[deleted]
senordevnyc 3mo ago
Google is a money printing machine, and their Q1 revenue and profit were up significantly vs last year.
- paulpauper 3mo ago
  Same for META
epolanski 3mo ago
I know several non tech companies that use Gemini and NotebookLM heavily (banks, insurance, consulting).
nradov 3mo ago
The investment thesis is a torrent of cash arriving to index funds and retirement target date funds has to go somewhere.
blehn 3mo ago
Google is a good bet because if AI continues to boom, they're in a good position (frontier lab, vertically integrated). If the bubble bursts and the frontier labs fail, they might do even better.
Legend2440 3mo ago
>Assuming no magical AGI singularity, by the end of the day, they're still selling the same services, but the services have gotten more expensive for them to provide. Well, they're hoping to sell new services on expensive $200/month subscriptions. The hope is that agents have more value than traditional software, because they do the work for you instead of just enabling you to do the work.
- entropi 3mo ago
  But if they do the work for me, then my time is less valuable. If my time is less valuable, I won't pay more to save more of my time.
  - Legend2440 3mo ago
    On the contrary, your time becomes more valuable the more tasks you automate, as your productivity per unit of time goes up. The time of a factory worker who runs machines producing 200000 widgets per hour is far more valuable than the time of a worker making 1 widget per hour by hand.
    - entropi 3mo ago
      Yeah but the money I receive is almost completely decoupled from the value I create. In fact, this can only reduce the value of my time since now my expertise is perceived to be commodified.
      - Legend2440 3mo ago
        Also not true. The factory worker is paid more than the worker making widgets by hand. GDP per capita has a strong correlation with average wages. The more productive your economy, the more money the average person makes.
        fridder 3mo ago
        there has been a decoupling of productivity gains and wage increases for some time. Not completely disconnected yet but still
scarmig 3mo ago
Google has a compelling story for many AI scenarios: it has lots of outs. It's the only frontier lab for which that's true. A massive bubble bursting wouldn't be existential for Google; it would be quite painful, but survivable, and even offers some potential upside (picking up assets and researchers from the wrecked, mangled corpses of other frontier labs on the cheap).
brainwad 3mo ago
GCP has wild YoY earnings growths and it has accelerated since cloud AI became a thing. AI is finally bringing Google a real second line of business besides ads.

solumunus 3mo ago

The market runs on memes, hype and fraud. Fundamentals haven’t mattered for a long time.

senordevnyc 3mo ago
I guess Google’s Q1 earnings of $62 billion were just hype.
- ponkpanda 3mo ago
  Yes, earnings are essentially hype/BS. Focus on cash/cashflow.
  - kaonwarb 3mo ago
    $64B trailing twelve months free cash flow. (https://s206.q4cdn.com/479360582/files/doc_financials/2026/q1/2026q1-alphabet-earnings-release.pdf https://s206.q4cdn.com/479360582/files/doc_financials/2026/q...)
    - ponkpanda 3mo ago
      That's trailing and mighty impressive. However when you decided to quote Q1 earnings. $62bn of Q1 earnings ends up at only $10bn. The LTM numbers are less relevant. AI-related capex is one hell of a drug.
      - senordevnyc 3mo ago
        The discussion here is whether Google can make money in the AI world. They obviously can. Whether they turn around and spend that money on capex to try and increase future earnings is irrelevant.
      - torginus 3mo ago
        Yeah, but I think the recent explosion of both memory prices and stock prices of memory makers highlight that datacenter GPUs cost about 10x as much as the would in a healthy supply-demand situation. Gaming equivalents of datacenter GPUs (I know they are not the same, but those had a hell of a lot of compute and bandwidth) cost less than 1/10th when normalized to FLOPS. So its scarcity pricing. If a paper were to come out tomorrow proving that additional compute has diminishing returns, there would be hell to pay in markets.
- zerobees 3mo ago
  And a market cap that exceeded 4.5 trillion dollars. I think we can all agree that Google is a legit business. But they were doing fine in 2023 too and had solid y/y revenue growth for much of their history. Their market cap tripled since 2023 and doubled since mid-2025. So, it's clearly more than "they continue to be a profitable company that grows around 15% y/y in real terms".
neogodless 3mo ago
You're half right. The market sets prices, and they are set based on multiple things. One of those is fundamentals. Consider the value of assets, whether tangible or intellectual property, human resources, binding contracts, etc. that add up to reasonable revenue forecasts and so forth. And the other aspect of prices is based on conjecture, speculation, meme-joiners, believing hype, and in some cases, fraud. The secret sauce is always going to be the one who can figure out, between the two factors going into price, what's right, and when. BUT... just saying that all stock market pricing is based on unreliable factors? That's not a useful, actionable statement. You can certainly stay out of investing in that market, but is that going to be your best course of action?

haberdasher 3mo ago

`I am really struggling to see what's the investment thesis behind Google valuation increasing 2x in response to AI` Google is basically Nvdia (TPUs), Tesla (Waymo Self-Driving), Hyperscaler, Netflix (YouTube) and a massive VC (Anthropic, Databricks, SpaceX, etc.) all rolled into one. Their valuation isn't really a 2x'ing so much as a reversion from halving.

cik 3mo ago
It's frequently said that vonglomerates usually carry through as their valuation, the multiplier of the lowest holding. If that's the case, Alphabet is worth more broken up. Similarly that makes their current valuation (and nay any valuation) theoretically too low.

deleted 3mo ago

[deleted]

senordevnyc 3mo ago

Google is a money printing machine, and their Q1 revenue and profit were up significantly vs last year.

paulpauper 3mo ago
Same for META

epolanski 3mo ago

I know several non tech companies that use Gemini and NotebookLM heavily (banks, insurance, consulting).

nradov 3mo ago

The investment thesis is a torrent of cash arriving to index funds and retirement target date funds has to go somewhere.

blehn 3mo ago

Google is a good bet because if AI continues to boom, they're in a good position (frontier lab, vertically integrated). If the bubble bursts and the frontier labs fail, they might do even better.

Legend2440 3mo ago

>Assuming no magical AGI singularity, by the end of the day, they're still selling the same services, but the services have gotten more expensive for them to provide. Well, they're hoping to sell new services on expensive $200/month subscriptions. The hope is that agents have more value than traditional software, because they do the work for you instead of just enabling you to do the work.

entropi 3mo ago
But if they do the work for me, then my time is less valuable. If my time is less valuable, I won't pay more to save more of my time.
- Legend2440 3mo ago
  On the contrary, your time becomes more valuable the more tasks you automate, as your productivity per unit of time goes up. The time of a factory worker who runs machines producing 200000 widgets per hour is far more valuable than the time of a worker making 1 widget per hour by hand.
  - entropi 3mo ago
    Yeah but the money I receive is almost completely decoupled from the value I create. In fact, this can only reduce the value of my time since now my expertise is perceived to be commodified.
    - Legend2440 3mo ago
      Also not true. The factory worker is paid more than the worker making widgets by hand. GDP per capita has a strong correlation with average wages. The more productive your economy, the more money the average person makes.
      - fridder 3mo ago
        there has been a decoupling of productivity gains and wage increases for some time. Not completely disconnected yet but still

scarmig 3mo ago

Google has a compelling story for many AI scenarios: it has lots of outs. It's the only frontier lab for which that's true. A massive bubble bursting wouldn't be existential for Google; it would be quite painful, but survivable, and even offers some potential upside (picking up assets and researchers from the wrecked, mangled corpses of other frontier labs on the cheap).

brainwad 3mo ago

GCP has wild YoY earnings growths and it has accelerated since cloud AI became a thing. AI is finally bringing Google a real second line of business besides ads.