Latest news with #Shmulik
Business Insider
01-08-2025
- Business
- Business Insider
Big Tech's data center spending spree shows no signs of slowing
Big Tech's AI spending bonanza isn't slowing down anytime soon. On quarterly earnings calls with investors this week, Amazon, Microsoft, Google, and Meta all raised capex guidance for the year as the AI race intensifies. The level of investment represents a dramatic spike in spending in a short period of time. Amazon spent $48.4 billion on capital investments in 2023. The cloud giant is tracking to spend over $100 billion this year. Google stunned investors with a $10 billion increase — out of character for what Wall Street considers the most measured of the cloud giants. Amazon signaled that it plans to fly right past its initial capex target of $100 billion for the year. Meta raised its forecast slightly. Microsoft, which briefly hit $4 trillion in market value this week after a blowout earnings call, also said it was continuing full-steam ahead on capital investments for the year. Even Apple, a typically austere and restrained spender when compared to its Big Tech peers, has jumped aboard the " AI crazy train," as Bernstein analyst Mark Shmulik dubbed Big Tech's race to build more data centers. Apple spent $9.5 billion in capital expenditures in the first three quarters of its fiscal year, up nearly 50% from the same period last year. CEO Tim Cook attributed the jump to AI investments, including data centers. Amazon spent $31.4 billion on capex in its second quarter, up from $24.3 billion in the first. On the company's earnings call, CFO Brian Olsavsky told investors that quarterly capital investments for the rest of the year are expected to mirror second-quarter spending. Bernstein's Shmulik adjusted his guidance to $117 billion in capex for the year. The company's stock was down 7% after hours, with investors disappointed by the company's profit guidance and sluggish growth compared to its rivals. For now, Amazon has "more demand than we have supply," said CEO Andy Jassy, with power being the biggest constraint. Microsoft expects to spend $30 billion in capex in its current quarter, driven by "strong demand signals," CFO Amy Hood said on the company's earnings call earlier this week. It spent $24.2 billion in the first quarter. The revised guidance represents a turnaround from the company's comments earlier this year, when it said it was expecting capex to start growing at a slower pace. On the call, Microsoft disclosed Azure revenue — it grew 34% to $75 million — for the first time ever. Google surprised investors by raising its capex forecast by $10 billion for the year to $85 billion. The massive expenditures are unusual for Alphabet-owned Google, Bernstein's Shmulik said. The company is hoping to keep its edge in the AI race after a strong quarter for cloud sales, which surged 32% in the most recent quarter. Meta adjusted the bottom of its capex range to $66 million, up from $64 million, and kept the top of the range at $72 million. CEO Mark Zuckerberg said on the company's earnings call this week that ad sales were up 20% in the most recent quarter thanks to AI. The company has been on an aggressive — and expensive — AI hiring spree, including a $15 billion investment in Scale AI.
Business Insider
25-07-2025
- Business
- Business Insider
Welcome aboard the 'AI crazy train'
Big Tech is in an AI arms race, each company trying to outspend the others on data centers, GPUs, networking gear, and talent. Engineers can be let go. But the infrastructure? That's permanent. If the AGI dream fades, you're stuck with massive, costly assets. So when Google announced it would hike capex by $10 billion to $85 billion in 2025 eyebrows went up. Most of it is for things you can't walk back: chips, data centers, and networking. Google is "jumping aboard the AI crazy train," Bernstein analyst Mark Shmulik wrote, referencing a song by the late bat biter Ozzy Osbourne. Meta's Mark Zuckerberg brags about Manhattan-sized data centers. And Elon Musk keeps hoarding GPUs. While Sam Altman is building mega-data centers with partners. JPMorgan dubbed this " vibe spending," warning OpenAI might burn $46 billion in four years. It's no shock when Elon, Zuck, and Sam flex on capex. But Google? That's surprising. "Google doesn't do this," Shmulik said. The company has been viewed as measured in recent years, prioritizing investment intensity with care. Not anymore. Now investors want to know: Will these swelling bets pay off? There are promising signs. Since May, Google's monthly token processing (the currency of generative AI) has doubled from 480 trillion to nearly a quadrillion. Search grew 12% in Q2, beating forecasts. Cloud sales surged 32%. CEO Sundar Pichai said Google is ramping up capex to support all this growth. But it's still a huge gamble. "Does the current return on invested capital seen in both Search and Cloud hold up at higher [capex] intensity levels," Shmulik asked, "or is the spend a very expensive piece of gum trying to plug an AI-sized hole?" He leans optimistic.
Business Insider
25-07-2025
- Business
- Business Insider
Welcome aboard the 'AI crazy train'
There's a fear in investing when a sector swells rapidly. Booming stock prices and aggressive spending feel great, until things inevitably cool off. Then comes the reckoning: Who overdid it in irreversible ways? Big Tech is in an AI arms race, each company trying to outspend the others on data centers, GPUs, networking gear, and talent. Engineers can be let go. But the infrastructure? That's permanent. If the AGI dream fades, you're stuck with massive, costly assets. So when Google announced it would hike capex by $10 billion to $85 billion in 2025 eyebrows went up. Most of it is for things you can't walk back: chips, data centers, and networking. Google is "jumping aboard the AI crazy train," Bernstein analyst Mark Shmulik wrote, referencing a song by the late bat biter Ozzy Osbourne. Meta's Mark Zuckerberg brags about Manhattan-sized data centers. And Elon Musk keeps hoarding GPUs. While Sam Altman is building mega-data centers with partners. JPMorgan dubbed this " vibe spending," warning OpenAI might burn $46 billion in four years. It's no shock when Elon, Zuck, and Sam flex on capex. But Google? That's surprising. "Google doesn't do this," Shmulik said. The company has been viewed as measured in recent years, prioritizing investment intensity with care. Not anymore. Now investors want to know: Will these swelling bets pay off? There are promising signs. Since May, Google's monthly token processing (the currency of generative AI) has doubled from 480 trillion to nearly a quadrillion. Search grew 12% in Q2, beating forecasts. Cloud sales surged 32%. CEO Sundar Pichai said Google is ramping up capex to support all this growth. But it's still a huge gamble. "Does the current return on invested capital seen in both Search and Cloud hold up at higher [capex] intensity levels," Shmulik asked, "or is the spend a very expensive piece of gum trying to plug an AI-sized hole?" He leans optimistic. Still, Google shares rose just 1% after these results. Not exactly a resounding endorsement.
Business Insider
23-07-2025
- Business
- Business Insider
‘Don't Be Late to the Party,' Top Analysts Hike Alphabet Stock's (GOOGL) Target Just Before Q2 Results
Alphabet (GOOGL) is receiving analyst attention ahead of its Q2 earnings, due on Wednesday, July 23. Two of the Top analysts raised the price target on GOOGL stock, citing strong near-term fundamentals and AI revenue growth potential. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Currently, Wall Street analysts expect Alphabet to report earnings per share (EPS) of $2.18 for the second quarter, above the $1.89 posted in the same period last year. Also, revenue is projected to grow by almost 11% year-over-year to $93.97 billion. Kelley Calls GOOGL Stock 'Controversial' Mark Kelley of Stifel raised his price target to $218 from $200, while maintaining a Buy rating. The five-star analyst sees strong performance in Alphabet's core businesses, particularly Search, where AI Overviews are driving better monetization despite weaker click volumes. YouTube estimates also appear solid. He expects Alphabet to post solid Q2 results. Still, he cautioned that any post-earnings rally may be short-lived given concerns about Alphabet's AI strategy and ongoing DOJ lawsuits. Also, he called the stock 'controversial.' Shmulik Sees Near-Term Strength for Alphabet Meanwhile, Bernstein's Mark Shmulik bumped his target to $195 from $185 and reiterated a Hold rating on GOOGL stock. Shmulik praised Alphabet's Q1 performance, noting 10% year-over-year growth in Search and YouTube. He pointed to strong growth in Search and YouTube from Q1 and expects similar trends to continue, supported by improved user engagement and rising Google app downloads. Shmulik also sees potential upside from the Gemini AI subscription price hike, which could boost Cloud revenue. Despite the positive setup, he remains cautious beyond the near term due to legal challenges and intense competition in digital advertising and AI. What Is the Target Price for Google Stock? On TipRanks, GOOGL stock has received a Strong Buy consensus rating, with 30 Buys and nine Holds assigned in the last three months. The average Google stock price target is $206.51, suggesting a potential upside of 7.93% from the current level.
Business Insider
28-05-2025
- Business
- Business Insider
Google has a massive mobile opportunity, and it's partly thanks to Apple
Google needs to seize this moment. Bank of America analysts this week even called Google's slew of new AI announcements a "Trojan horse" for its device business. For years, Apple's iOS and Google's Android have battled it out. Apple leads in the US in phone sales, though it still trails Android globally. The two have also gradually converged; iOS has become more customizable, while Android has become cleaner and easier to use. As hardware upgrades have slowed in recent years, the focus has shifted to the smarts inside the device. That could be a big problem for Apple. Its AI rollouts have proven lackluster with users, while more enticing promised features have been delayed. The company is reportedly trying to rebuild Siri entirely using large language models. Right now, it's still behind Google and OpenAI, and that gap continues to widen. During Google's I/O conference this week, the search giant bombarded us with new AI features. Perhaps the best example was a particularly grabby demo of Google's "Project Astra" assistant helping someone fix their bike by searching through the bike manual, pulling up a YouTube video, and calling a bike shop to see if certain supplies were in stock. It was, of course, a highly polished promotional video, but it made Siri look generations behind. "It has long been the case that the best way to bring products to the consumer market is via devices, and that seems truer than ever," wrote Ben Thompson, analyst and Stratechery author, in an I/O dispatch this week. "Android is probably going to be the most important canvas for shipping a lot of these capabilities," he added. Google's golden opportunity Apple has done a good job of locking users into its ecosystem with iMessage blue bubbles, features like FaceTime, and peripherals like the Apple Watch that require an iPhone to use. Google's Pixel phone line, meanwhile, remains a rounding error when compared to global smartphone shipments. That's less of a problem when Google has huge partners like Samsung that bring all of its AI features to billions of Android users globally. While iPhone users will get some of these new features through Google's iOS apps, it's clear that the "universal assistant" the company is building will only see its full potential on Android. Perhaps this could finally get iOS users to make the switch. "We're seeing diminishing returns on a hardware upgrade cycle, which means we're now really focused on the software upgrade cycle," Bernstein senior analyst Mark Shmulik told Business Insider. Without major changes by Apple, Shmulik said he sees the gap in capabilities between Android and iOS only widening. "If it widens to the point where someone with an iPhone says, 'Well my phone can't do that,' does it finally cause that switching event from what everyone has always considered this incredible lock-in from Apple?" Shmulik said. Beyond smartphones Internally, Google has been preparing for this moment. The company merged its Pixel, Chrome, and Android teams last year to capitalize on the AI opportunity. "We are going to be very fast-moving to not miss this opportunity," Google's Android chief Sameer Samat told BI at last year's I/O. "It's a once-in-a-generation moment to reinvent what phones can do. We are going to seize that moment." A year on, Google appears to be doing just that. Much of what the company demoed this week is either rolling out to devices imminently or in the coming weeks. Google still faces the challenge that its relationships with partners like Samsung have come with the express promise that Google won't give its home-grown devices preferential treatment. So, if Google decides to double down on its Pixel phones at the expense of its partners, it could step into a business land mine. Of course, Google needs to think about more than smartphones. Its renewed bet on XR glasses is a bet on what might be the next-generation computing platform. Meta is already selling its own augmented reality glasses, and Apple is now doubling down on its efforts to get its own smart glasses out by the end of 2026, Bloomberg reported. Google this week demoed glasses that have a visual overlay to instantly provide information to wearers, which Meta's glasses lack and Apple's first version will reportedly also not have. The success of Meta's glasses so far is no doubt encouraging news for Google, as a new era of AI devices is ushered in. Now it's poised to get ahead by leveraging its AI chops, and Apple might give it the exact opening it's waited more than a decade for. "I don't know about an open goal," said Shmulik of Apple, "but it does feel like they've earned themselves a penalty kick."
