5 February 2025
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
“Alphabet delivered an inline set of numbers, but, and crucially for market watchers, it had a big miss on the growth of its cloud business. Alphabet indicated that much of this was down to supply constraints, but there will be a worry that the company is falling behind slightly in the AI arms race that continues apace. Indeed, in a period when we have seen AI supposedly become less capital intensive with the introduction of DeepSeek, Alphabet has committed a 43% increase in capital expenditure for 2025. This is great news for the likes of Nvidia, but for Alphabet we are yet to see a real return on investment on AI spend, so there is a risk that it could be money not being well spent and disappear into a virtual black hole.
“Ultimately Alphabet faces the innovator’s dilemma. It has built such a dominant position in search that it now risks losing some of that to new technologies that it has perhaps been slightly slower to spot or embrace. As a result, increasing sums will need to be spent just to protect that position, let alone grow it.
“Furthermore, despite the change in Presidency, Alphabet continues to face the prospect of being broken up by the Department of Justice. It is tough to predict what Donald Trump will do in this scenario and as such there remains a real possibility that the DoJ will get its way and end Google’s monopoly of the search industry. These clouds, along with the fact that Meta is outperforming in the digital advertising sphere, means Alphabet has a long road to travel before becoming one of the darlings of the Magnificent Seven once again.”
AMD
“AMD may still be taking market share from Intel in the Central Processing Unit side of things, but it remains a long way behind Nvidia and is struggling to catch up when it comes to Graphics Processing Units. Investors want the company to take the fight to Nvidia, but for now it is very much struggling to break the moat and disrupt its market position. This year will hopefully see some tentative steps in the right direction with new products coming online in the middle part of the year.
“Furthermore, the company provided a positive guide in its statement, despite no specifics around AI revenues in 2025, and this should help to reignite the strategy and bring the company forward. For investors, however, that means it is very much wait and see mode with AMD and whether it can back up the positive words.”
