00:00We should point out Google shares down just a little bit here partly on the dilution that will come out
00:04of this.
00:05But I'm more focused on the money and the money that's being I know they telegraphed this already.
00:10But this is already a company sitting on one hundred fifty hundred sixty billion dollars cash on their balance sheet.
00:16Do they really need to go to the public markets for this. Well right now they feel you know the
00:21window is right in terms of raising money.
00:23We see so many companies big IPOs you know in terms of the money that is being raised and in
00:30the case of Alphabet even though they raise their CapEx it feels like they could do more simply because they
00:38have the advantage of vertical integration with TPUs their own LLM where why would they be equal in CapEx to
00:46a Microsoft.
00:46And that's where I think they're trying to go bigger. So I want you to just take a step back
00:50particularly for our viewers that haven't followed this much.
00:52When we talk about seeing you know eighty billion dollars well in this case one hundred eighty to one hundred
00:57ninety billion dollars being deployed on CapEx where exactly does that money go.
01:01Well it's for building data centers for giving money to TSMC to make those TPU chips really doing things on
01:10an end to end basis unlike a Microsoft or a meta that have to buy those chips from Nvidia and
01:17pay those you know seventy five percent gross margins.
01:20Alphabet is all using its own chips and even in tropic has trained its model and uses TPUs even for
01:29inferencing.
01:29So from that perspective Alphabet is a competitor to an opening in tropic. It is also a competitor to Nvidia
01:37on the chip side.
01:38And that's the advantage they have in terms of allocating more of their capital towards the chip making efforts that
01:44others don't have the benefit of.
01:46So eating its own cooking and in that sense you know fighting multiple fronts here you think about this eighty
01:52billion dollars when you think about those you know sort of twin races more than twin races that it's in
01:58right now.
01:58How far does that go to sort of solidifying Alphabet's place and maybe also taking share here.
02:05Well I mean we know in terms of their credit rating they can issue a hundred year bond as well
02:12and you know they've been very successful in all sorts of fundraising with regards to their data center effort.
02:19But look when it comes to market share right now we have heard from Nvidia compute is revenue and you
02:26know the more compute you have the more revenue growth you will have.
02:30And so from that perspective and Nvidia pre paying TSMC hundred and twenty billion dollars just to lock in capacity
02:38goes to show the power of having that strong balance sheet.
02:42And even though Alphabet has a strong balance sheet it doesn't hurt to raise more money you know just to
02:47go big in terms of the compute side of things.
02:51And this is also interesting that you take a look at some of the details here.
02:55This ATM program is intended to also facilitate for a period of time in admin change and how Alphabet meets
03:02the tax obligations when it comes to employee equity grants saying that this approach will mimic a sell the cover
03:08model meaning that upon vesting of restricted stock units shares will still be delivered to employees net of taxes that
03:15the company will use corporate cash to settle taxes on behalf of employees.
03:20I'm going to think about that for a while but I mean I wonder how it ties into this talent
03:25race that we're seeing among a lot of these big AI companies.
03:29I mean we're talking about AI but it's being built by humans still and you know I wonder if this
03:34is part of that.
03:34It certainly is and look I mean if you are an engineer working in AI at Google and you see
03:42you know open AI and Anthropic going public.
03:45There's always that attractiveness in terms of you know a fast growing company going public and that's where Google has
03:53to do its part in terms of you know retaining their talent.
03:57I do want to ask you about some comments that we heard a little bit earlier or overnight I should
04:01say out of Jensen Wong at that big conference going on that was going on in Taiwan obviously the big
04:06chip reveal for PCs got a lot of the attention.
04:09But he was specifically addressing this issue of kind of the death of software basically kind of said and to
04:15paraphrase and look you know basically the way this market is growing you're going to need more software engineers.
04:21And I do wonder particularly when you look at the rally that we've seen in software names over the last
04:25few days with a kind of premature that investors kind of threw a lot of these names out about the
04:30window.
04:30I mean right now you will see you know there will be a lot of back and forth when it
04:34comes to software simply because we had very strong results this earnings season from the likes of data dogs snowflake
04:41MongoDB.
04:42And so you know the pieces around you know software companies really slowing down in terms of the growth rate
04:49didn't really pan out for a large chunk of software this earnings season.
04:53But look there is certainly an impact that these model companies have had in terms of the growth rate. So
04:59we will see you know some of the companies do take a hit as well.
05:03So it will be a little bit of both for the time being.
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