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The problem with AMZN, MSFT, and META is GOOGL.
My averages for these stocks AMZN ($215), MSFT ($360), META ($600), GOOGL ($160).
During Amazon's earnings, the cloud earnings growth was 28%, which is very impressive considering how big AWS already is. This is exactly what investors are looking for reacceleration of cloud growth for Amazon. Why is the stock experiencing weakness? Google's earnings. Google GCP growth look so unreal that I had to confirm from many data source that it actually real almost 64% YoY% growth. This just makes 28% seem insignificant when it really good, not to mention Apple entry into AI bringing in large amount of capital almost exclusively benefit Google from inference running on GCP to Gemini in Siri. I would say AWS as a software platform is superior than GCP from switching cost and first mover advantage, but Google hardware TPUs partnering with Broadcom is better than Trainium. Another problem is Amazon is the inferior source of core business, Amazon relies on AWS which many would argues is associated to AI risk, whereas Amazon e-commerce business is in consumer discretionary which is technically a low quality business due to high CAPEX of investment for low margin return selling commodities. Compare to Google, search engine and YouTube which are higher quality business being capital light and higher margins. Everything from core business being higher quality to vertically integrated, Google is almost OBJECTIVELY a better business.
Moving to Meta, this one is more obvious than Amazon. Meta just lacks hard core consistent AI revenue either from elite models (Gemini) or cloud business (GCP). Investors are tired of promises and beliefs in futuristic revenue growth from heavy CAPEX bets from Meta from failure of Metaverse. Headwinds from regulation and lawsuit banning young children from using social media to me is overstated, because weak contribution to almost none revenue contribution. The biggest problem with Meta is the lack of significant AI distribution compared to Google, Apple, and Microsoft. This is why Zuckerberg was so keen on Metaverse as a form of distribution but it failed to to Apple strengthening its moat. As someone invested in Meta and use LLMs regularly, it almost laughable why I would ever go on Instagram and use their models it a horrible form of distribution compared to ChatGPT, Claude, CoPilot (workplace), Gemini. The only thing about Meta that I am bullish although harder to see because it technically "under the hood" would be that AI is elevating Meta's revenue by A LOT in their core products with revenue growth over 30% making valuations look very cheap. These are the reasons why Google just look so much more compelling.
Lastly Microsoft, the biggest problem with Microsoft is that the strongest support point for this stock is that it very cheap relative to the quality of the moat, I think that is correct. I am a big fan of Chris Hohn and his investing philosophy, but I side with Bill Ackman on this one as it could literally be a successful investment based on cheap valuation and long lasting moat of distribution. There are many reasons why I think the stock "deserve" to underperform, first would be Copilot which is just so obviously behind Google Gemini. Another underrated point would be Microsoft Azure losing grounds, this is not obvious in the numbers, but if you keep a close look at OpenAI partnership becoming a huge mess for Azure. Almost 50% of cloud revenue is exposed to OpenAI, and countless articles building narrative that Azure is devastatingly technologically inferior to AWS. I do agree that M365 networking moat effects will be able to "shove" AI tools down throats of many corporations (I experience this first hand as a corporate worker), Copilot will succeed with distribution and many attempts to improve similar to how Zoom is completely displaced by Teams although competition seems extremely fierce. Overall, it just the lack of catalysts and overstated risk to M365 dragging the stock to the mud.
What is the point of this post? I agree with investment narratives of most MAG7, but Google is just the biggest problem to all of them. To me why would I ever invest in the other hyperscalers that could have weaknesses in business quality or lack of catalysts in the hope of futuristic outcome, when Google story is so strong and obvious. I really think this is why Berkshire Hathaway and TCI management piled money in Google, because the story is obvious.
When I bought Google, my thesis just includes how they have one of the best AI distribution in Search, Work Tools, and YouTube. They also have access to extremely rich data sources that can be advantageous to training elite LLMs. The threat to search is overstated looking at search data improving gradually. Google Cloud becoming a cash cow. I was correct like many other in this subreddit. However, I never imagine there would be a day where Google just become like the Thanos of the stock market holding arguably the best position in AI story. Google Gemini is comparable and competitive amongst AI labs like Anthropic, OpenAI. Google Cloud is growing at breakneck speed threatening market share of AWS, Azure. Google TPUs with Broadcom denting market share making NVIDIA reassure investors that ASIC won't be a problem. Not to mention, they got cash cow ad businesses like YouTube and Search that allow them to invest in cash burners like chips and AI R&D giving them higher quality position than OpenAI or Anthropic that have to raise a ton of debt. Not to mention, core products like YouTube killing traditional TVs threatening Netflix, core search growing. Most irrelevant point, Tesla investors being so cult-like bullish on robotaxis, but Waymo is just so prominent.