For twenty years, Google had the perfect business.
The beauty of its business model was that it did not have to spend.
One more search cost almost nothing. No extra factory and no new machine to replace every few years.
Then last quarter, Sundar Pichai, the man behind the machine, decided selling answers is no longer fun.
For the very first time since its founding, after 87 consecutive quarters of cash generation, Alphabet has a negative cash flow.
Pichai placed a $200 billion bet on building the shovels for AI: chips, servers, and data centers. And says the spending will rise to an even more stunning level again next year.
Immediately, this triggered a sell-off.
But the deeper problem is not the stock price. It’s that Google may be changing the economics of its entire business. I’ll answer these questions in this one:
How did Google redeem itself from being an AI underdog?
What is Google becoming?
How real is Gemini’s demand?
Is the overall AI demand even real?
What to watch next?
Let’s start with a little bit of drama.
