00:00Another AI story that we're watching this morning and that we have been watching for weeks, for months, it's Alphabet.
00:06Because investors are growing increasingly confident that the company's semiconductors could represent significant growth drivers for the Google's parent.
00:14Look at what the stock has done. After slumping for a lot of this year, it continues to rise. It's up now nearly 70% on the year.
00:21Joining us now is Bloomberg Tech reporter Ryan Vlostelica.
00:24Ryan, okay, so you have TPUs and GPUs. The fight between them, if Google were to be serious about selling this technology from them, just how much of a boon would it be for Alphabet?
00:37Hey, good morning. Thanks for having me.
00:39So I talked to some experts and analysts here, and they consider this to be an extremely significant potential business for Alphabet.
00:46One person I spoke to said this could potentially be worth $900 billion over the coming years if Alphabet were to get serious about selling its chips in the same way that an NVIDIA or an AMD does.
00:58Now, obviously, this would be a big undertaking for them.
01:01You'd have a lot of manufacturing and distribution sort of issues you'd have to work out.
01:06But there is so much demand for these AI chips that if they were able to take a meaningful part of the market away from NVIDIA, that would be a huge revenue boost for the company.
01:17There still is this question, though, Ryan, of what is the model that works out?
01:21Is it the big spending and your ability to get these advanced chips and advanced LLMs?
01:26Or is it what we've seen out of China, small, cheap models?
01:31Is there a clear path to which is kind of winning the race?
01:33Well, Alphabet just did come out with its latest Gemini model, which seemed like it got very strong reviews in terms of its ability to meet all these various AI benchmarks.
01:44So there's a lot of optimism about its place in the market right now.
01:47I have seen a lot of people talking about these more nimble, smaller AI models, which are less compute intensive.
01:54There seems like there's a lot of optimism around there.
01:55But if you're talking about the major LLMs right now, it does seem like Alphabet is sort of in the pole position with Anthropic and OpenAI also having their own models.
02:04But it does seem like people really feel like the stars are aligning for Alphabet.
02:07Isn't that bad news for all the other LLMs, specifically because of the health of the balance sheet of Alphabet, that they could continue to run an LLM, not have anyone pay for it,
02:20while everyone else bleeds red trying to catch up.
02:22And then, you know, you get this world where you have a monopoly from Alphabet, from Gemini, and then they raise prices.
02:29Could that not kind of be the direction that we're headed?
02:32Well, certainly it does seem like if you look at all the different elements of AI, Alphabet is in a very strong position in all of them.
02:38Its LLM is considered to be very strong.
02:40It has this chip business, which it's using mostly for its internal cloud right now.
02:44But like we were talking about, if they start selling this around to other companies, that's another potential driver for them.
02:49They also have a whole lot of AI data and talent and distribution.
02:53They have companies like Waymo and YouTube, which are different ways that you can monetize like AI technology overall.
03:01And like you said, they are very profitable.
03:03They have a lot of cash.
03:05They have a lot of cash flow, which does mean that they can run these very expensive LLMs in a way that isn't detrimental to their financial profile.
03:13Whereas you have growing concern about something like OpenAI, where every query and every user does result in cash burn.
03:22And there is increasing concern about OpenAI's financial profile, especially relative to Alphabet.
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