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In the ongoing Cloud Czar monarchy, changes are afoot in tech’s aristocracy as we venture through 2024.
Microsoft (NASDAQ:MSFT) has surged past Apple (NASDAQ:AAPL), while Meta Networks (NASDAQ:META) has made strides, and Amazon.Com (NASDAQ:AMZN) has seen substantial growth. Apple, with majority revenue outside cloud operations, stands apart.
Within this niche, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), better known as Google, is struggling to match the impressive performances of its peers. It lingers at par with the average S&P stock, the weakest link in the ensemble.
Still, it remains a sound investment solely due to its position among the Czars.
A Rise to Royalty
I draw a clear distinction between Cloud Czars and the outliers, Nvidia (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA), for a meaningful reason.
The strength of major tech companies stems from their foothold in the cloud realm. All five Czars made strategic decisions a decade ago to channel cash flow into extensive, networked data centers.
Google was the pioneer in this shift. Its search-centric approach necessitated solutions for scalability, paving the way for advancements in parallel processing, virtualization, cost-effective hardware, and open source frameworks – pillars of the modern-day tech dominion, driving the 21st century economy.
Once cash flow is directed towards the cloud, it becomes the conduit for all other endeavors. Google excels in delivering precisely targeted, cost-efficient ads, whether in text or video formats, generating billions in annual revenue at minimal expense.
Cloud: The New Horizon
The inception of Generative Artificial Intelligence (GenAI) marked the commencement of a new chapter in the Cloud Era following the unveiling of OpenAI on November 30, 2022.
Google was caught off guard by this shift. Although its Gemini, previously Bard, is trailing behind others like ChatGPT in capabilities, the tech giant is undeterred. It plans to invest $50 billion in capital expenditure this year, a mere fraction of its 2023 cash flow. Google Cloud, the fastest-growing segment, witnessed a 25% revenue spike in the past quarter, showing profitability.
Any entity seeking GenAI services or wishing to develop its own must engage with a Cloud Czar. With 25 data centers globally, Google is revamping them with cutting-edge Nvidia chips and software, ensuring sustained relevance and demand for its infrastructure. Google Cloud is poised for accelerated growth.
A Diamond in the Rough
Concerns surrounding Gemini have rendered Google an undervalued asset, even among the elite Cloud Czars.
Its modest price-to-earnings ratio of 26 pales in comparison to industry peers like Microsoft, Meta, Amazon, and even Oracle (NASDAQ:ORCL), a recent convert to cloud services.
Several challenges plague Google, notably Ruth Porat’s fixation on Wall Street reception over engineering feedback and CEO Sundar Pichai’s perceived lack of visionary leadership. Nevertheless, these hurdles are surmountable with some strategic rejigging. In the nascent GenAI epoch, Google can acquire solutions if lacking in-house. Considering its current position, it presents an attractive, low-risk investment opportunity.
When the odds are favorable, you buy in and wait for the ascent. As long as Google trails the Cloud Czars, it remains a logical choice for investors to hold through the unfolding decade.
As of this moment, Dana Blankenhorn holds LONG positions in NVDA, MSFT, AMZN, AAPL, and GOOGL. The opinions spotlighted herein belong to the writer and comply with the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn embarked on his financial and tech journalism journey in 1978. He authored Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, accessible on the Amazon Kindle store. Connect with him at danablankenhorn@gmail.com, tweet him @danablankenhorn, or subscribe to his complimentary Substack newsletter.
