1 00:00:00,040 --> 00:00:02,840 Welcome back everyone. It has been a huge day in the 2 00:00:02,840 --> 00:00:05,080 market so far. We made it through the big test 3 00:00:05,080 --> 00:00:07,520 of this earnings season. NVIDIA reported earnings 4 00:00:07,520 --> 00:00:09,680 yesterday and they did not disappoint. 5 00:00:09,680 --> 00:00:13,960 NVIDIA is up 15% today once again after earnings blowing 6 00:00:13,960 --> 00:00:18,320 away expectations, they're now currently up 61% year to date. 7 00:00:18,760 --> 00:00:20,480 No, that's not over the trailing year. 8 00:00:20,520 --> 00:00:24,920 That is year to date, like 2024, like the last two months. 9 00:00:24,920 --> 00:00:27,280 Now if you're not a market expert, let me just remind you, 10 00:00:27,280 --> 00:00:31,360 being up 61% in less than two months is considered good. 11 00:00:31,360 --> 00:00:34,120 And it's not just NVIDIA sharing in on the action here. 12 00:00:34,120 --> 00:00:39,000 We also have AMD, the forgotten chip maker that's up 11% on the 13 00:00:39,000 --> 00:00:42,040 day. AMD is up more after Nvidia's 14 00:00:42,040 --> 00:00:45,000 earnings report than they are on their own earnings report. 15 00:00:45,160 --> 00:00:47,640 This NVIDIA earnings report is seemingly lifting the entire 16 00:00:47,640 --> 00:00:49,120 market. Everyone seems to be getting 17 00:00:49,120 --> 00:00:52,160 involved. The Dow Jones is up .77, the S&P 18 00:00:52,160 --> 00:00:57,560 500 is up 1.74%, and the Nasdaq's up 2 1/2 percent. 19 00:00:57,600 --> 00:01:01,000 A massive rally for the NASDAQ. These big companies are crushing 20 00:01:01,000 --> 00:01:03,840 it and likewise My Portfolio is having a nice rally today. 21 00:01:04,280 --> 00:01:06,560 Now it looks like M1 Finance changed around the user 22 00:01:06,560 --> 00:01:09,440 interface here. Normally it has the total gains 23 00:01:09,440 --> 00:01:11,800 like right here has a total value here. 24 00:01:12,080 --> 00:01:15,000 It looks like they move the value right here in the pie. 25 00:01:15,000 --> 00:01:18,240 So I have a total value of 654,000 and then we have to 26 00:01:18,240 --> 00:01:21,280 Scroll down to see the gains and it looks like they segmented it 27 00:01:21,480 --> 00:01:24,280 into two categories. We have the dividends earned 28 00:01:24,400 --> 00:01:29,680 $27,800 and the market gain which is capital appreciation of 29 00:01:29,680 --> 00:01:32,840 162,000. The total return is your capital 30 00:01:32,840 --> 00:01:35,880 appreciation, which is the market gain combined with the 31 00:01:35,880 --> 00:01:37,640 dividends earned. So when I look at my total 32 00:01:37,640 --> 00:01:40,960 returns, it's around $189,000 in gains. 33 00:01:41,240 --> 00:01:45,160 We're creeping up to $200,000 in gains, which is incredible. 34 00:01:45,480 --> 00:01:47,760 Now of course the goal is to continue to compound this 35 00:01:47,760 --> 00:01:50,920 portfolio at an attractive rate and earn good returns on the 36 00:01:50,920 --> 00:01:53,640 investments I make. So I can make this $200,000 in 37 00:01:53,640 --> 00:01:56,680 gains, 300,400 thousand and so on. 38 00:01:56,680 --> 00:01:58,840 That's the goal long term, but I'm sure I'll run into some 39 00:01:58,840 --> 00:02:01,480 hurdles along the way. But overall things are going 40 00:02:01,480 --> 00:02:04,480 really well and today has been an incredibly good day off the 41 00:02:04,480 --> 00:02:07,400 back of NVIDIA earnings. For example, if I look at my one 42 00:02:07,400 --> 00:02:12,040 day performance, we just zoom in to today alone, I'm up $10,000 43 00:02:12,360 --> 00:02:14,280 and you'll see on your portfolios as well that you're 44 00:02:14,280 --> 00:02:16,360 likely in the green by a large amount. 45 00:02:16,360 --> 00:02:18,640 When I look through My Portfolio, I notice a lot of the 46 00:02:18,640 --> 00:02:21,120 companies are doing really well. They're trading up in price, 47 00:02:21,120 --> 00:02:23,120 they're making gains. Many of them are at record 48 00:02:23,120 --> 00:02:24,720 highs. I believe a lot of them have 49 00:02:24,720 --> 00:02:27,880 moved up substantially in the past year and they're now close 50 00:02:27,880 --> 00:02:30,080 to their intrinsic value. But when I look through all of 51 00:02:30,080 --> 00:02:32,840 my companies, there's one of them that I believe is not being 52 00:02:32,840 --> 00:02:35,600 treated quite fairly, and I still believe it's not being 53 00:02:35,600 --> 00:02:37,600 recognized for its intrinsic value. 54 00:02:37,680 --> 00:02:40,680 That company is Google. Google has recently gone through 55 00:02:40,680 --> 00:02:44,400 a string of being unprepared, fumbling presentations and bad 56 00:02:44,400 --> 00:02:47,560 news, and this has caused investors to question the future 57 00:02:47,560 --> 00:02:50,200 of this company. The streak of Googles criticism 58 00:02:50,200 --> 00:02:52,560 started off with their capital allocation. 59 00:02:52,840 --> 00:02:56,160 The company hired around 50,000 new employees and only a nine 60 00:02:56,160 --> 00:02:58,200 month period. Investors became concerned that 61 00:02:58,200 --> 00:03:00,880 they were being careless with the amount of compensation, the 62 00:03:00,880 --> 00:03:03,120 amount of staff that was required to run the company. 63 00:03:03,280 --> 00:03:05,640 Google implemented layoffs and it was revealed during the 64 00:03:05,640 --> 00:03:07,880 layoffs that they fired an extensive amount of massage 65 00:03:07,920 --> 00:03:10,120 therapists. But capital allocation wasn't 66 00:03:10,120 --> 00:03:12,840 the only issue. Microsoft also got a leg up on 67 00:03:12,840 --> 00:03:16,600 Google in the AI race, taking a lot of the shine off of Google 68 00:03:16,600 --> 00:03:19,560 and showing that Microsoft had a product it was at least very 69 00:03:19,560 --> 00:03:22,520 competitive, if not better than what Google was working on. 70 00:03:22,560 --> 00:03:25,800 Google quickly rushed their AI chatbot bar demo, which had 71 00:03:25,800 --> 00:03:28,040 factual errors, which was embarrassing for them on 72 00:03:28,040 --> 00:03:31,440 Twitter, but they also made a mistake during the demo itself. 73 00:03:31,560 --> 00:03:34,440 Employees at Google said that this seemed like a rush response 74 00:03:34,520 --> 00:03:37,560 after the botched bar demo. Google also released another 75 00:03:37,560 --> 00:03:39,960 demo for Gemini where they showed footage of someone 76 00:03:39,960 --> 00:03:42,520 seemingly talking to the computer, but it was later found 77 00:03:42,520 --> 00:03:44,880 out that much of the demo was exaggerated. 78 00:03:44,880 --> 00:03:47,240 Speed up and the prompts were different than what he was 79 00:03:47,240 --> 00:03:49,560 saying. Overall, they called the demo 80 00:03:49,600 --> 00:03:51,320 faked. This is another piece of bad 81 00:03:51,320 --> 00:03:54,120 publicity for Google as they're trying to build trust in their 82 00:03:54,200 --> 00:03:56,680 AI program, and the controversies continue to this 83 00:03:56,680 --> 00:03:58,240 day. The latest one is that Googles 84 00:03:58,400 --> 00:04:02,240 AI Gemini is automatically swapping prompts to make them 85 00:04:02,240 --> 00:04:04,920 more diverse and in some cases causing Gemini to offer 86 00:04:04,920 --> 00:04:06,720 inaccuracies in historical images. 87 00:04:06,720 --> 00:04:09,160 And Google has already released a statement apologizing for 88 00:04:09,160 --> 00:04:11,560 this, saying that they're missing the mark and they're 89 00:04:11,560 --> 00:04:13,640 trying to fix the issue. These type of things are 90 00:04:13,640 --> 00:04:16,959 continuing to happen seemingly all the time with Google and it 91 00:04:16,959 --> 00:04:20,320 does have an impact on how investors view the company and 92 00:04:20,320 --> 00:04:22,800 the stock price. To add on to all of this, we 93 00:04:22,800 --> 00:04:27,080 also have reports from CNBC videos like this one titled Is 94 00:04:27,080 --> 00:04:30,320 this the end of Google Search? How the giant could lose its 95 00:04:30,320 --> 00:04:35,200 lead that has a staggering 630,000 views a lot of investors 96 00:04:35,200 --> 00:04:37,760 are at least concerned about or they want to look at the 97 00:04:37,760 --> 00:04:40,720 potential failure of Google, the inability for the company to 98 00:04:40,720 --> 00:04:43,520 continue on with its dominant lead in search And reporters 99 00:04:43,520 --> 00:04:46,040 from CNBC are not the only ones with this concern. 100 00:04:46,040 --> 00:04:48,880 The long term tech focused investor Brad Gerstner recently 101 00:04:48,880 --> 00:04:51,840 went on to TV and explained why he thinks that the dominant 102 00:04:51,840 --> 00:04:54,080 position of Google is coming to an end. 103 00:04:54,080 --> 00:04:56,480 Now when I look at all of these missteps that Google has made 104 00:04:56,480 --> 00:04:59,080 and all of these bearish predictions on it, I have to 105 00:04:59,080 --> 00:05:01,720 consider whether or not I still want to hold this company. 106 00:05:01,720 --> 00:05:04,640 I don't hold Google in my passive income portfolio, so 107 00:05:04,640 --> 00:05:07,960 it's not in my main one, but I do hold it in the story Fund. 108 00:05:07,960 --> 00:05:10,800 The story funds a smaller portfolio where I only invest in 109 00:05:10,800 --> 00:05:13,280 a handful of companies, and Google's one of them. 110 00:05:13,280 --> 00:05:15,680 I've held this company for a long period of time in this 111 00:05:15,680 --> 00:05:18,040 portfolio, but I have to consider whether or not I want 112 00:05:18,040 --> 00:05:20,440 to keep this as a large concentrated position. 113 00:05:20,440 --> 00:05:23,400 What I've ultimately decided is that I don't buy into these 114 00:05:23,400 --> 00:05:25,840 arguments. I don't believe that Google is 115 00:05:25,840 --> 00:05:28,680 doomed, and in this episode I wanted to highlight some of the 116 00:05:28,680 --> 00:05:31,280 biggest reasons. I think that Google not only is 117 00:05:31,280 --> 00:05:33,960 not doomed, but I think the company has a great future ahead 118 00:05:33,960 --> 00:05:35,040 of it. We're going to go through this 119 00:05:35,040 --> 00:05:36,080 point by point. Now. 120 00:05:36,080 --> 00:05:38,360 The first thing I think is important to outline is that 121 00:05:38,360 --> 00:05:41,400 great companies like Google, they fumble. 122 00:05:41,720 --> 00:05:45,960 They fumble semi frequently. Zuck caused a large sell off by 123 00:05:45,960 --> 00:05:49,760 talking about the Metaverse way too much on earnings calls. 124 00:05:49,760 --> 00:05:52,280 It was basically the only thing he was focused on. 125 00:05:52,600 --> 00:05:56,800 He alienated most of Wall Street by nonstop talking about the 126 00:05:56,800 --> 00:05:58,720 Metaverse. It was around this point that 127 00:05:58,720 --> 00:06:01,360 Mark Zuckerberg continued to talk about the Metaverse and how 128 00:06:01,360 --> 00:06:04,200 much he's going to spend on it, throwing a lot of cash flows and 129 00:06:04,200 --> 00:06:07,720 CapEx into something that Wall Street wasn't sold on meta 130 00:06:07,720 --> 00:06:09,640 stocks sold off for the following year, and then 131 00:06:09,640 --> 00:06:12,400 Zuckerberg finally focused on costs and efficiencies. 132 00:06:12,400 --> 00:06:15,040 Saying that we're going to have the year of efficiency, which 133 00:06:15,040 --> 00:06:17,200 caused a rapid recovery in the stock. 134 00:06:17,320 --> 00:06:19,720 Meta is not the only example of a company doing this. 135 00:06:20,000 --> 00:06:23,400 Netflix also caused a large sell off by losing subscribers for 136 00:06:23,400 --> 00:06:25,760 two consecutive quarters. It was right around this point 137 00:06:25,760 --> 00:06:28,520 in time that Netflix first said they'd ever lose subscribers. 138 00:06:28,520 --> 00:06:31,360 They said it was going to be around 400,000, but the trends 139 00:06:31,360 --> 00:06:34,160 were going against them. The stock dropped dramatically, 140 00:06:34,160 --> 00:06:38,000 going down around 30%. And then we had time #2. 141 00:06:38,000 --> 00:06:40,200 The following earnings report, they said they're going to lose 142 00:06:40,400 --> 00:06:44,280 about a million, so Netflix lost more subscribers causing the 143 00:06:44,280 --> 00:06:46,840 stock to sell off again. Now I can obviously see the 144 00:06:46,840 --> 00:06:48,880 following history. Netflix is right back where it 145 00:06:48,880 --> 00:06:50,640 was before they lost subscribers. 146 00:06:50,680 --> 00:06:53,480 Amazon is another example of a company that caused a large sell 147 00:06:53,480 --> 00:06:56,480 off in the stock, this time by focusing on huge CapEx 148 00:06:56,480 --> 00:06:59,480 investments which caused their cash flows to go negative. 149 00:06:59,560 --> 00:07:03,320 In the years of 2021 and 2022, Amazon decided to go all in on 150 00:07:03,320 --> 00:07:06,120 expanding their network, growing their CapEx. 151 00:07:06,320 --> 00:07:08,280 This caused the free cash flow to plummet. 152 00:07:08,360 --> 00:07:11,000 Investors didn't like that. You can see how much investors 153 00:07:11,000 --> 00:07:13,320 didn't like it by the the fact that the stock price went from 154 00:07:13,320 --> 00:07:17,680 $180 all the way down to 80. They lost over 60% of their 155 00:07:17,680 --> 00:07:19,720 market cap. But again, you notice the trend 156 00:07:19,720 --> 00:07:21,800 here. Amazon is now getting close to 157 00:07:21,800 --> 00:07:24,200 an all time high. Great companies fumble from time 158 00:07:24,200 --> 00:07:26,920 to time and we've seen ample examples of this over the past 159 00:07:26,920 --> 00:07:29,280 couple of years. And the fumbles, the big 160 00:07:29,280 --> 00:07:32,600 problems that these companies faced are usually quickly 161 00:07:32,600 --> 00:07:35,080 forgotten by the market. They don't even think about it 162 00:07:35,080 --> 00:07:38,040 the following couple of years. Think about Mark Zuckerberg and 163 00:07:38,040 --> 00:07:40,160 the Metaverse. Is that really a concern for 164 00:07:40,160 --> 00:07:42,800 anyone anymore? Does anyone really even talk 165 00:07:42,800 --> 00:07:43,840 about that? No. 166 00:07:43,840 --> 00:07:46,200 That was a time ago and investors have moved on. 167 00:07:46,240 --> 00:07:47,680 They don't care about it anymore. 168 00:07:47,680 --> 00:07:50,200 Look at the example of Netflix. Are investors still concerned 169 00:07:50,200 --> 00:07:53,040 about them losing subscribers 7 quarters ago? 170 00:07:53,400 --> 00:07:54,720 No. Investors have moved on. 171 00:07:54,720 --> 00:07:56,960 They're forward-looking. I see this type of thing 172 00:07:56,960 --> 00:07:59,800 frequently with investors. When you're in the moment 173 00:07:59,800 --> 00:08:03,160 looking at the bad news, looking at the botched demos, looking at 174 00:08:03,160 --> 00:08:07,200 Microsoft release their AI model first, they seem like really big 175 00:08:07,200 --> 00:08:09,800 issues, and they can cause investors to make incorrect 176 00:08:09,800 --> 00:08:11,640 assumptions about the future of the stock. 177 00:08:11,640 --> 00:08:14,760 In reality, great companies, ones like Google, are typically 178 00:08:14,760 --> 00:08:17,280 able to figure their problems out eventually. 179 00:08:17,280 --> 00:08:19,680 They have enough market share, they have enough money, they 180 00:08:19,680 --> 00:08:22,600 have enough talent to be able to move on from these stumbles. 181 00:08:22,600 --> 00:08:26,200 If I had a guess, I believe that investors will forget about 90% 182 00:08:26,200 --> 00:08:28,040 of these challenges within a year. 183 00:08:28,080 --> 00:08:30,760 Now the second thing that I'd point out, which just adds in a 184 00:08:30,760 --> 00:08:33,760 little bit of safety to this company is as Google trades at a 185 00:08:33,760 --> 00:08:36,080 low valuation relative to the market. 186 00:08:36,120 --> 00:08:39,159 Look at Google's PE ratio. It's currently out of 21. 187 00:08:39,159 --> 00:08:44,440 Currently, the S&P 500 trades at a Ford PE estimate of 22.7. 188 00:08:44,440 --> 00:08:46,720 Most companies of this equivalent quality trade much 189 00:08:46,720 --> 00:08:49,440 higher than the market. Now after that, we also know 190 00:08:49,600 --> 00:08:54,160 that Sundar, the CEO of Google, is getting costs under control. 191 00:08:54,400 --> 00:08:57,840 One of the primary criticisms I had for Sundar Pichai is that he 192 00:08:57,840 --> 00:08:59,880 wasn't focused on cost structure. 193 00:09:00,120 --> 00:09:02,640 He was being a little LAX with how he's running the company, 194 00:09:02,920 --> 00:09:04,760 but we can see that improving over time. 195 00:09:04,840 --> 00:09:07,000 One of the things we can look at with Google is the number of 196 00:09:07,000 --> 00:09:09,880 employees over the past four consecutive quarters. 197 00:09:10,200 --> 00:09:13,160 For example, in the March quarter of 2023, they had 198 00:09:13,160 --> 00:09:17,880 190,700 employees. That's a lot of employees they 199 00:09:17,880 --> 00:09:19,920 hired rapidly to get to this point. 200 00:09:19,960 --> 00:09:21,800 But look what they've done over the following year. 201 00:09:21,880 --> 00:09:26,680 They went from 190,000 to 181. So they laid off roughly 10,000 202 00:09:26,680 --> 00:09:29,520 employees, which is a big number, but compared to their 203 00:09:29,520 --> 00:09:32,520 total employees, it's still a relatively small percentage. 204 00:09:32,720 --> 00:09:35,640 Regardless, it was a reduction in the employee headcount and 205 00:09:35,640 --> 00:09:37,680 then even after layoffs, they seem to be a bit more 206 00:09:37,680 --> 00:09:42,160 disciplined in their hiring. They went from 181 to 182. 207 00:09:42,360 --> 00:09:45,480 So in a three month period increasing by 1000 is not a big 208 00:09:45,480 --> 00:09:48,640 deal for a company of this size. That's slow growth in their 209 00:09:48,640 --> 00:09:50,800 employee headcount. And then in their most recent 210 00:09:50,800 --> 00:09:57,600 quarter, they went from 182.3, 182.5, only hiring a net 300 211 00:09:57,600 --> 00:10:00,480 employees, meaning that over the course of the full year, Google 212 00:10:00,480 --> 00:10:03,400 seems to be paying far more attention to their expansion in 213 00:10:03,400 --> 00:10:04,920 employees. They're being a lot more 214 00:10:04,920 --> 00:10:07,600 disciplined in their approach and Sundar should be getting 215 00:10:07,600 --> 00:10:09,480 credit for that. He is getting costs under 216 00:10:09,480 --> 00:10:11,440 control. So I know that these stumbles 217 00:10:11,440 --> 00:10:13,400 that Google has had are likely temporary. 218 00:10:13,440 --> 00:10:15,480 We know that the company's trading at a relatively low 219 00:10:15,480 --> 00:10:17,040 valuation compared to the market. 220 00:10:17,400 --> 00:10:19,640 We know that the CE OS getting costs under control. 221 00:10:19,960 --> 00:10:22,880 The next thing I'd point out is that Google's growing much 222 00:10:22,880 --> 00:10:25,160 faster than the market. When we look at the free cash 223 00:10:25,160 --> 00:10:29,240 flow growth of Google, it reached a record high in 2023 of 224 00:10:29,240 --> 00:10:34,000 69.5 billion. That is growth of almost 20% for 225 00:10:34,000 --> 00:10:37,360 the past decade. In the past five years it's 25% 226 00:10:37,440 --> 00:10:39,240 on a compounded annual growth rate. 227 00:10:39,600 --> 00:10:42,200 That is incredibly fast. There's only a handful of 228 00:10:42,200 --> 00:10:45,760 companies that have been able to pull this off and this doesn't 229 00:10:45,760 --> 00:10:49,200 tell the full story because Google has also done share 230 00:10:49,200 --> 00:10:52,400 buybacks as they've grown. We can look at this illustrated 231 00:10:52,400 --> 00:10:55,280 in the shares outstanding. There's a difference here with 232 00:10:55,280 --> 00:10:57,800 the other charts. With shares outstanding, we want 233 00:10:57,800 --> 00:11:00,600 to see them going down. So we actually want to see these 234 00:11:00,600 --> 00:11:03,440 numbers in red. Red means a decrease. 235 00:11:03,440 --> 00:11:06,040 And in shares outstanding decreases are good. 236 00:11:06,320 --> 00:11:09,840 So we have the shares outstanding going down by 3.3% 237 00:11:10,120 --> 00:11:13,640 over the trailing one year. That is an aggressive share 238 00:11:13,640 --> 00:11:16,920 buyback policy. Sundar is really buying back 239 00:11:16,920 --> 00:11:20,440 shares at an accelerated rate and the low valuation of Google 240 00:11:20,600 --> 00:11:23,680 made this fairly easy to do. When we look at the buybacks and 241 00:11:23,680 --> 00:11:26,400 incorporate that into the free cash flow growth, we get the 242 00:11:26,400 --> 00:11:29,600 free cash flow per share, which is even faster. 243 00:11:29,600 --> 00:11:32,120 And the fact that they're now focusing on costs and likely 244 00:11:32,120 --> 00:11:34,840 growing their top line faster than growing their expenses, 245 00:11:35,200 --> 00:11:37,360 we'll see some margin improvement, which will mean 246 00:11:37,360 --> 00:11:40,400 more free cash flow, which will mean more buybacks going back 247 00:11:40,400 --> 00:11:42,520 into the company, reducing the share count. 248 00:11:42,560 --> 00:11:45,520 So I can't say for certain what will happen in the future, but 249 00:11:45,520 --> 00:11:48,000 based on all the data we have, it looks very positive. 250 00:11:48,040 --> 00:11:50,680 The next thing I want to address is a major concern about Google 251 00:11:50,680 --> 00:11:52,840 with the future of the company and AI. 252 00:11:52,840 --> 00:11:55,960 Brad Gerstner is a tech investor that runs a massive fund called 253 00:11:55,960 --> 00:11:58,440 Altimeter, and one of the companies that he is avoiding 254 00:11:58,440 --> 00:12:02,000 investing in is Google. Harris's reasoning behind it. 255 00:12:02,000 --> 00:12:06,960 Here's my fundamental position. Search is going to be replaced 256 00:12:07,240 --> 00:12:10,120 by agent LED information discovery. 257 00:12:10,240 --> 00:12:13,200 I see it every day. My 15 year old son says Dad, I 258 00:12:13,200 --> 00:12:15,240 don't use Google anymore. I just use Chat GB. 259 00:12:15,240 --> 00:12:18,080 TI talked to 2000 people at the Javits Center. 260 00:12:18,080 --> 00:12:20,800 How many people have used ChatGPT instead of Google? 261 00:12:20,800 --> 00:12:23,280 Over the course of the last two days, 1000 of hands in the room 262 00:12:23,280 --> 00:12:25,200 go up. I asked my analysts who are 263 00:12:25,200 --> 00:12:27,560 sitting on their desk. They're replacing their use of 264 00:12:27,560 --> 00:12:31,040 Google with ChatGPT. We are having a fundamental 265 00:12:31,040 --> 00:12:36,440 structural shift in how people retrieve and discover answers to 266 00:12:36,440 --> 00:12:39,600 the questions they have. So Google is going to have to 267 00:12:39,600 --> 00:12:42,880 compete in this new thing, OK, Meta's going to compete. 268 00:12:42,880 --> 00:12:46,000 Apple's going to compete. Microsoft with Copilot, ChatGPT, 269 00:12:46,000 --> 00:12:48,600 etcetera. They're going to be 678 270 00:12:48,600 --> 00:12:51,640 incredible competitors there. Google will be one of those 271 00:12:51,640 --> 00:12:54,880 competitors, and let's assume that they're a very competent 272 00:12:54,880 --> 00:12:57,080 competitor because they have all of these assets. 273 00:12:57,360 --> 00:13:01,520 The question to you do you what do you think the likelihood is 274 00:13:01,520 --> 00:13:04,160 that they're going to reconstruct is dominant of 275 00:13:04,160 --> 00:13:07,880 monopoly in this new thing as they have in search? 276 00:13:08,120 --> 00:13:10,440 Now I must say, with great respect to Brad Gerstner, I 277 00:13:10,440 --> 00:13:12,080 could not disagree more fully with him. 278 00:13:12,080 --> 00:13:13,720 I think he's completely wrong here. 279 00:13:13,840 --> 00:13:16,280 First of all, the whole premise of his argument is that people 280 00:13:16,280 --> 00:13:19,760 are fleeing Google search and rushing to ChatGPT to get 281 00:13:19,760 --> 00:13:24,000 information, and he references a lot of anecdotes of people he 282 00:13:24,000 --> 00:13:27,240 knows using ChatGPT and not using Google. 283 00:13:27,440 --> 00:13:30,040 My 15 year old son says dad, I don't use Google anymore. 284 00:13:30,040 --> 00:13:33,400 I just use Chat GB. TI talked to 2000 people at the 285 00:13:33,400 --> 00:13:34,800 Javits Center. How many people have used 286 00:13:34,800 --> 00:13:37,840 ChatGPT instead of Google Over the course of the last two days, 287 00:13:37,840 --> 00:13:41,040 1000 hands in the room go up. I asked my analysts who are 288 00:13:41,040 --> 00:13:43,400 sitting on their desk. They're replacing their use of 289 00:13:43,400 --> 00:13:45,920 Google with ChatGPT. He believes that everyone around 290 00:13:45,920 --> 00:13:49,360 him is moving away from Google search to ChatGPT, and my 291 00:13:49,360 --> 00:13:51,160 experience could not be more different. 292 00:13:51,440 --> 00:13:54,680 Everyone I know doesn't care about ChatGPT. 293 00:13:54,960 --> 00:13:56,960 Everyone I know that lives in the real world. 294 00:13:56,960 --> 00:14:00,120 The average person that's just wanting a bit of information 295 00:14:00,360 --> 00:14:03,920 goes to google.com and gets a search of what restaurant they 296 00:14:03,920 --> 00:14:06,320 want to visit, what different books they're looking at, 297 00:14:06,520 --> 00:14:08,200 different subjects they're interested in. 298 00:14:08,600 --> 00:14:11,600 None of them are using large language models and Gemini and 299 00:14:11,600 --> 00:14:13,640 Chachi PT. In fact, I notice that the type 300 00:14:13,640 --> 00:14:17,040 of people that are most drawn to Chachi PT aren't the average 301 00:14:17,040 --> 00:14:19,000 person. They're typically super tech 302 00:14:19,000 --> 00:14:21,320 focused people like Brad Gerstner. 303 00:14:21,600 --> 00:14:24,480 So it makes sense to me that people in his immediate circle 304 00:14:24,640 --> 00:14:27,800 are more biased towards this new technology, but I don't think 305 00:14:27,800 --> 00:14:30,240 that that's accurately representing the broader world. 306 00:14:30,240 --> 00:14:33,000 So I believe that his anecdotal experience in this is not 307 00:14:33,000 --> 00:14:35,600 representative and it's way off the mark of the average 308 00:14:35,600 --> 00:14:37,440 experience. I believe the biggest thing that 309 00:14:37,440 --> 00:14:41,320 investors miss is that AI text like ChatGPT, and large language 310 00:14:41,320 --> 00:14:44,760 models have different use cases than Google search. 311 00:14:45,040 --> 00:14:48,160 They are different and people use them for different reasons. 312 00:14:48,480 --> 00:14:51,040 Here's a Venn diagram that I believe accurately represents 313 00:14:51,040 --> 00:14:55,440 the overlap in use cases from ChatGPT or different AI text 314 00:14:55,440 --> 00:14:58,680 models to Google search. If the blue circle represented 315 00:14:58,680 --> 00:15:02,320 Google searches use cases, the black circle represented Chatchy 316 00:15:02,320 --> 00:15:05,520 BT's use cases. The majority of their use cases 317 00:15:05,520 --> 00:15:08,280 are completely different. Chatchy BT is used for things 318 00:15:08,280 --> 00:15:11,640 like math equations, coding problems, customer service, 319 00:15:11,920 --> 00:15:14,800 writing out e-mail templates. Then Google search is used for 320 00:15:14,800 --> 00:15:17,960 things like looking up information on a new movie or an 321 00:15:17,960 --> 00:15:20,880 actor looking up information on a historical event. 322 00:15:20,880 --> 00:15:23,760 The huge majority of their use cases are unique, but they do 323 00:15:23,760 --> 00:15:27,000 have some overlap in the middle. There are some cases where you 324 00:15:27,000 --> 00:15:29,840 could use either one, but that is the minority of cases. 325 00:15:29,840 --> 00:15:33,600 Even if Google lost the battle in AI text and GEM and I didn't 326 00:15:33,600 --> 00:15:37,880 compete with ChatGPT, they would still make a fortune with their 327 00:15:37,880 --> 00:15:39,920 search engine over the next 10 years. 328 00:15:40,200 --> 00:15:43,640 That's assuming they completely lose this battle in AI. 329 00:15:43,720 --> 00:15:46,160 So I completely disagree with this assertion that Google 330 00:15:46,160 --> 00:15:49,160 search is being replaced by AI text programs. 331 00:15:49,520 --> 00:15:51,720 Now we can see this in the numbers. 332 00:15:52,000 --> 00:15:55,800 Most of these short term risks have not shown U in the numbers 333 00:15:55,880 --> 00:15:58,160 at all. You think you'd see them by now 334 00:15:58,160 --> 00:16:02,800 with an entire year of people using Chat GT, but being which 335 00:16:02,800 --> 00:16:08,240 is powered with Chat GT did not take 1% market share from Google 336 00:16:08,240 --> 00:16:10,360 last year. This was the big year for 337 00:16:10,360 --> 00:16:13,520 Microsoft to take market share. They promoted it in every single 338 00:16:13,520 --> 00:16:15,680 tech conference. They put it on the front page of 339 00:16:15,680 --> 00:16:17,240 being. They tried to make it as 340 00:16:17,240 --> 00:16:20,640 powerful as possible to compete with Google Search, and from 341 00:16:20,640 --> 00:16:23,000 those efforts they couldn't gain a percentage of market share. 342 00:16:23,040 --> 00:16:25,520 And then finally, one thing that's underappreciated by 343 00:16:25,520 --> 00:16:29,560 investors time and time again is the difficulty in changing user 344 00:16:29,560 --> 00:16:32,240 behaviors and habits. People, generally speaking, are 345 00:16:32,240 --> 00:16:34,120 very lazy. They like doing what they've 346 00:16:34,120 --> 00:16:36,960 done before. It's easier to Kee people using 347 00:16:36,960 --> 00:16:40,360 Google alications with Gemini just being one click away from 348 00:16:40,360 --> 00:16:43,280 googlecom. You can find access to a large 349 00:16:43,280 --> 00:16:46,080 language model that's satisfactory, or you can 350 00:16:46,080 --> 00:16:49,360 download Chat GT, which will require you to go to the App 351 00:16:49,360 --> 00:16:52,520 Store, download a separate app, and log into a separate account. 352 00:16:52,520 --> 00:16:56,040 So I would not use Twitter or YouTube tech reviewers as an 353 00:16:56,040 --> 00:16:58,000 indicator of normal human behavior. 354 00:16:58,200 --> 00:17:01,360 Most humans will use the easier route, which is sticking with 355 00:17:01,360 --> 00:17:03,080 Google because they already use it. 356 00:17:03,200 --> 00:17:05,520 So overall, Google has been through a little bit of a bumpy 357 00:17:05,520 --> 00:17:07,040 Rd. over the past couple of years. 358 00:17:07,240 --> 00:17:09,480 There's been a lot of doubting that's happening recently. 359 00:17:09,880 --> 00:17:12,160 I just wanted to throw my opinion in that I think the 360 00:17:12,160 --> 00:17:15,160 company's fine and I do not believe that Google search is 361 00:17:15,160 --> 00:17:16,560 doomed. That's going to be it for this 362 00:17:16,560 --> 00:17:18,480 episode. I hope you enjoy it and I'll see 363 00:17:18,480 --> 00:17:19,280 you in the next one.