Google & Mag 7 is NOT Cheap

AI Summary

Author argues Google and the Mag 7 are not cheap because massive AI capex will compress earnings growth and margins.

GOOGL — SHORT The author argues Google's roughly $180 billion capex will cost about $23 billion per year for six years, requiring 13% revenue growth just to keep earnings flat, and even 20% revenue growth yields only 14.8% earnings growth. They expect a tough Q4 and Q1 as investors demand ROI on capex rather than margin compression from depreciation and interest expense. The stated risk is that the payoff from this spending is not there for at least a couple of years.

Google's 180 billion capex will cost an estimated 23b per year for the next 6 years.

META — SHORT The author groups Meta with Microsoft, Google, and Amazon as being in the same boat of heavy capex-driven margin compression. They argue these companies deserve to be selling off hard because huge expenses and depreciation now will only pay off in many years, which investors dislike. The stated risk is that the payoff is not there at least in the next couple of years.

Meta, Microsoft, Google, and Amazon, are in the same boat. They deserve to be selling off hard.

MSFT — SHORT The author includes Microsoft among the Mag 7 companies facing the same capex-driven margin compression as Google. They argue these firms deserve to sell off hard because the payoff from huge current expenses and depreciation is years away. The stated risk is that returns on this capex will not materialize for at least a couple of years.

Meta, Microsoft, Google, and Amazon, are in the same boat. They deserve to be selling off hard.

AMZN — SHORT The author places Amazon in the same group as Meta, Microsoft, and Google, all facing capex-driven margin compression. They argue these companies deserve to be selling off hard because the payoff from heavy spending and depreciation is years away. The stated risk is that returns on this capex will not materialize for at least a couple of years.

Meta, Microsoft, Google, and Amazon, are in the same boat. They deserve to be selling off hard.

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u/Fit-Personality5848 Reddit r/ValueInvesting

Google capex compresses earnings; not cheap

The author argues Google's roughly $180 billion capex will cost about $23 billion per year for six years, requiring 13% revenue growth just to keep earnings flat, and even 20% revenue growth yields only 14.8% earnings growth. They expect a tough Q4 and Q1 as investors demand ROI on capex rather than margin compression from depreciation and interest expense. The stated risk is that the payoff from this spending is not there for at least a couple of years.

u/Fit-Personality5848 Reddit r/ValueInvesting

Meta grouped with Mag 7 capex selloff

The author groups Meta with Microsoft, Google, and Amazon as being in the same boat of heavy capex-driven margin compression. They argue these companies deserve to be selling off hard because huge expenses and depreciation now will only pay off in many years, which investors dislike. The stated risk is that the payoff is not there at least in the next couple of years.

u/Fit-Personality5848 Reddit r/ValueInvesting

Microsoft in same capex boat as Google

The author includes Microsoft among the Mag 7 companies facing the same capex-driven margin compression as Google. They argue these firms deserve to sell off hard because the payoff from huge current expenses and depreciation is years away. The stated risk is that returns on this capex will not materialize for at least a couple of years.

u/Fit-Personality5848 Reddit r/ValueInvesting

Amazon in same capex boat as Google

The author places Amazon in the same group as Meta, Microsoft, and Google, all facing capex-driven margin compression. They argue these companies deserve to be selling off hard because the payoff from heavy spending and depreciation is years away. The stated risk is that returns on this capex will not materialize for at least a couple of years.

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