Rik

Investor

[Rik @CircleOfComp]

@Gold_Shellback @Para_Capital @tbombs90 @jimcramer No idea what this means.

[Rik @CircleOfComp]

@Gold_Shellback @Para_Capital @tbombs90 @jimcramer New capacity is coming and they will overbuild you an be sure of it, but that has to be paid for. If the economics are not attractive nobody is building anything.

[Rik @CircleOfComp]

@Gold_Shellback @tbombs90 @jimcramer This isnt true. Depends on the company and i dont think most people actually fully understand what ai is. Its going to touch every square inch of the economy.

[Rik @CircleOfComp]

@Gold_Shellback @tbombs90 @jimcramer The market is the market. It wont last forever. Its still a cycle. The economic value of ai will not drop to the chip makers over time.

[Rik @CircleOfComp]

@Gold_Shellback @tbombs90 @jimcramer Google wont even tell anyone what the roic is on cloud investments. The reason is they do not want to discose to supplier and customers that they are making a fortune.

You cant build out capacity on thin margins. What are tou going to do produce chips for no earnings?

[Rik @CircleOfComp]

@Gold_Shellback @tbombs90 @jimcramer If you pay very low prices for years, how or why are the hmb producers going to invest in capacity?

[Rik @CircleOfComp]

@jaker1419 @TheTranscript_ Yes, because its an unbelievably sensitive number right now. You think they are going to scream to all their suppliers and customers that the roic is massive?

[Rik @CircleOfComp]

Literally proof how early we are. We still have commentary from people who have no idea what Ai is. Twitter is just full if people whos total knowledge you could write on the back of a postsge stamp.

[Hedgie @HedgieMarkets]

🦔2.2% of US households pay for an AI subscription as of April. The median spend is $20 a month. More Americans pay for sports betting apps (5%) than pay for AI. ChatGPT has 900 million weekly users but only 5% convert to paid. 37% of consumers say none of AI's uses are helpful. 30% say they're less likely to buy a product marketed as "AI-powered." Companies are spending $600 billion on AI infrastructure this year to serve a market where 97.8% of households don't pay for the product.

My Take
2.2% penetration nearly four years after ChatGPT launched. Netflix hit 25% household penetration in a similar timeframe. Spotify hit 15%. The growth is fast in percentage terms but off a base so small that doubling it still leaves you in single digits. The capex projections, the bond issuances, the IPO valuations all assume consumer adoption eventually catches up to the spending. Nearly four years in, it hasn't.

The pushback I'll get is that enterprise revenue is what counts and consumer subscriptions are a sideshow. Alphabet's cloud grew 82%. Anthropic reportedly hit $4.5 billion in ARR. But a lot of that enterprise spending is funded by VC money and hyperscaler capex, which makes it circular. Consumer willingness to pay is the closest thing to a genuine market signal, and right now that signal says $20 a month from 2.2% of households. The $600 billion in spending this year is a bet that the other 97.8% eventually show up. I'm not seeing it.

Hedgie🤗

[Rik @CircleOfComp]

@dividendology @TheLastNumen Its still a lay up. Look out to 2028. Its crazy what the market is allowing you to buy here at 4 trillion. Will easily ouperform from here, but might take a while to play out.

[Rik @CircleOfComp]

@StanFastic @MaxAnderson @matt_barrie Its in the numbers, go read the financial statements. Nobody needs to say anything, its there in black and white.

[Rik @CircleOfComp]

@weary_centurion @CalumLewis You are wrong. Google just put on 70 billion of backlog in a quarter even at 80% cloud rates and the anthropic deal was already made last quarter and is 35% of the backlog. Ai has been a 10+ year road map for google, theres no fomo whatsoever. You have no idea.

[Rik @CircleOfComp]

@RobertHarrisonv @kasperdnyd @TihoBrkan Not only this but the greatest capital allocator in history literally just exposed berkshire to over 30 billion dollars in google.

People have no idea whats coming over a decade time horizon.

[Rik @CircleOfComp]

Complete misread. The roic is way to sensitive a number right now because of negotiations with customers and more to the point suppliers. They do not want to admit to massive margins but theres signs, and they are pretty obvious.

[Evergreen @evrgn11112231]

there’s gotta be a better way to answer this question

just give a min hurdle rate for capital allocation decisions and a realistic range of expectations with puts and takes for low and high

$GOOGL
$META
$AMZN
$MSFT

[Rik @CircleOfComp]

Why do people do this. Such confidence and its completely wrong.

Even though google managed to eat in to the backlog by increasing growth to a massive 82%, its backlog still grew by 70 billion in the quarter. The speed of the buildout is whats unlocking the backlog.

[M Mohan @mukund]

I don’t think many commentators have mentioned this yet.
$GOOGL is showing phenomenal growth on cloud thanks to @AnthropicAI

That’s it.

It’s not Gemini. It’s not their 100 other bets on Antigravity, nano banana anything else.

And the markets betting this Anthropic growth is unsustainable

[Rik @CircleOfComp]

@StanFastic @MaxAnderson @matt_barrie And nobodys coming for that market anyway for obvious reasons. Why as a loss making start up would you try bounce into googles back yard and get your arse kicked given all the ai opportunities out there. Fighting with the 900lb gorilla is pretty dumb.

[Rik @CircleOfComp]

@StanFastic @MaxAnderson @matt_barrie And absolutely nobody does this. People like to search for products. Its a feature not a bug. And even if you do this, your still going to google after you find the product to see who has it at the best price and fastest shipping.

[Rik @CircleOfComp]

The narrative always follows price. Its wild to watch. Meanwhile Google is selling for 17x 2028 earnings. Its a layup.

[Rik @CircleOfComp]

If you are an investor, why are you asking the market as to whether you should invest or not 😂.

Literally unbelievable, doesnt matter how many times we do this, human nature never changes does it.

[Rene Sellmann @ReneSellmann]

If Alphabet $GOOG opens down almost 4% today, as implied, I think this is pretty bearish for Google's stock.

If a stock stops making new highs based after good news, and $GOOG posted an absolutely stunning quarter in my view, it signals that there's more downside than upside from current levels (in my view; and I could of course be wrong!).

From my perception change framework:

"Selling after parabolic moves is not about calling the top. It’s about acknowledging that perception has likely moved FAR ahead of fundamentals."

[Rik @CircleOfComp]

@MaxAnderson @matt_barrie I dont think this is true for the most part. Maybe some edge cases. People go to buy something they dont do it on LLMs even if theyve done some research there.

[Rik @CircleOfComp]

@weary_centurion @Kaizen_Investor .. google has the data. They have visibility and are building out i to a backlog a business that is operating at 35% margins 😂. Cloud grew at 82% and still put on 70 billion of backlog. What more do you want? Lol

[Rik @CircleOfComp]

@weary_centurion @Kaizen_Investor As for the capex, the only risk is too big exposure to loss making business like anthropic but otherwise they whole point in investing is to find companies that can put out huge amounts of dollars at high returns. But the thing you are misssing in all of this..