30 October 2024
Alphabet delivers in short-term but risks remain ever present; AMD living in Nvidia's shadow
If you are covering Alphabet’s or AMD’s latest financial results, please find below a comment from Ben Barringer, technology analyst at Quilter Cheviot:
Alphabet
“Given the medium and long-term threats at play for Alphabet – the Department of Justice and AI agents – these are a very clean set of numbers. Investors will have been craving this given the news about potential remediation with the DoJ and the fact that Google’s market share is under threat. Crucially, though, while these threats are very present in the background, Alphabet continues to innovate and improve its offerings to customers in what is a buoyant digital advertising market.
“Revenues were up 15% with operating profit beating expectations considerable. With new and improving features with search, Google has a decent future even with the DoJ trying to break it up. YouTube has also been very stable which has allowed the business to focus on the areas it needs to, without worrying about its other core components.
“Interestingly, the cloud business was growing strongly and should provide a good read across for the rest of the sector. Capex in this space is stable and growing into 2025, but some were a little disappointed not to see more growth. Ultimately, Alphabet is still spending huge amounts and this should be ample to help it keep up with the likes of Microsoft and Amazon.
“The business is also expanding its partnership with Uber for Waymo, with self-driving taxis becoming an increasingly intriguing part of the Alphabet estate. However, while innovation is coming through, the threats are big and thus the stock will struggle despite good short-term trends. Ultimately, investors await what will happen with the DoJ.”
AMD
“AMD delivered a decent set of numbers, but it is ultimately living in Nvidia’s shadow. This is making life difficult as comparisons are naturally drawn between the two businesses, when in fact they are at very different scales. The more important factor for AMD is that it is gaining market share from Intel, taking advantage of it being a wounded beast and cementing its place as the second source for chips after Nvidia. All investors can ask for is for AMD to continue to beat its expectations and raise guidance, which it is doing, and eventually the comparisons to Nvidia should subside.”
