What's Going on With Alphabet Stock? | GOOG Stock Deep Dive Part 2

Added: 2026-05-07

[00:00:00]In part two of my deep dive into Alphabet stock, we're going to start by looking at the progress in its AI business. And this is more important because the company is spending hundreds of billions of dollars, approaching $200 billion this year alone, and forecasting even more spending in 2027.

[00:00:18]So, as an investor, you want to look into the early progress, and you want to see evidence of early success to justify these big spending plans.

[00:00:27]I want to thank The Motley Fool for sponsoring this video. Visit fool.com/parr kev for the 10 best stocks to buy now.

[00:00:35]And one way the management team is reporting evidence of increasing usage of its artificial intelligence is by processed tokens. So, their first-party models now process more than 16 billion tokens per minute via direct API use from customers.

[00:00:55]And that's up from $10 billion in the previous quarter.

[00:00:59]So, quarter over quarter, there was a 60% increase in usage of its product, its artificial intelligence product. And that is tremendous improvement, tremendous growth just from the previous quarter. 60% growth would be excellent year-over-year numbers, but these are quarter-over-quarter numbers. If you annualize this growth rate, it would mean over 200%, approaching 250% growth year over year.

[00:01:28]And this is a large-size business. So, this is the kind of data you want to see as an investor to justify these big spending plans.

[00:01:38]This is, you know, if you recall from my book, and if you haven't read my book yet, one of the chapters in my book is the the customer value proposition.

[00:01:47]Measuring how much customers value your product. And one way to measure that is by increasing usage. Alphabet reporting huge increases in usage. And then if you zoom out, I know artificial intelligence is new for Alphabet, but if you zoom out within this company specifically, what they've demonstrated to investors is they can make a lot of profit by charging almost nothing to customers via advertising or other monetization capabilities.

[00:02:24]So, if Alphabet can get the customer usage, if they can get a product that's widely appreciated and used and utilized, they can find ways to monetize. They've demonstrated that to investors. Right? With Google Search, with YouTube, with Gmail, with several other products, they offer it mostly for free to customers, and they're able to generate massive profits over more than a decade by offering a free customer product. And so, they've demonstrated they can monetize, which is, you know, the other part of that equation, right?

[00:03:04]One chapter I talked about the customer value proposition, and of course it goes together with the other chapter in my book, unit economics. It's easy to offer customers a free product and a product that they love, but if you're not able to monetize effectively, that's not a sustainable business.

[00:03:22]You'll go out of business if you can't generate sufficient profits. Alphabet has demonstrated to investors over more than a decade, more than 15 years, that it can monetize even free products and still generate massive profits. So, Alphabet is also among the other big tech companies that, you know, reiterated their commitment to Nvidia GPUs. Uh these are a core part of their AI accelerator portfolio, and they'll be among the first to offer Nvidia's next-generation Vera Rubin GPU, which is coming out later this year.

[00:04:00]But Alphabet, like the other big-cap tech companies, is creating its own and has been creating its own accelerators in-house. And, you know, not manufacturing them, but creating them in-house and then outsourcing the manufacturing. And Alphabet is arguably the furthest along in their chips, and they introduced their eighth-generation TPUs.

[00:04:26]These are individually specialized for training and serving, and able to take on the most demanding agentic workflows.

[00:04:34]This is part of the reason why Nvidia stock fell after the big four reported quarterly results, and they all indicated that they will be spending more money developing their proprietary chips. Investors were questioning the importance of Nvidia if these proprietary chips are gaining in importance. And um I agree, it is a little bit concerning, but investors can be relieved somewhat with the statements that all of the big four made in that they're still committed to Nvidia GPUs. These incremental chips, proprietary chips, are in addition to Nvidia GPUs. Nvidia remains at least one step ahead of the competition, although the competition is making strides in closing that gap. Additionally, Alphabet is harnessing artificial intelligence internally to improve productivity, and their engineers are now orchestrating fully autonomous digital task forces and building at a faster velocity.

[00:05:37]Each individual engineer is now so much more productive with the utilization of artificial intelligence. So, they're getting a lot more value per employee.

[00:05:48]And these are still the very early innings of these developments. And so, not only is Alphabet earning revenue by selling computing power to third parties, but Alphabet is also improving performance of the company by internally utilizing artificial intelligence. So, I've been saying that I felt Alphabet and the other big-cap tech companies will generate a sufficient return on invested capital on artificial intelligence. These are companies that have a history of effectively allocating capital, and the early results I'm seeing reiterate my belief that they will be generating a good return on invested capital. But before you make a decision on buying or selling Alphabet stock, I recommend watching the whole analysis, this whole deep dive I've done on Alphabet. The next part in the series is popping up on your screen. Click that link, and I'll see you over there shortly.