๐๐ผ๐ผ๐ด๐น๐ฒ ๐๐ ๐ช๐ถ๐ป๐ป๐ถ๐ป๐ด ๐๐ต๐ฒ ๐๐ ๐ช๐ฎ๐ฟ. ๐ง๐ต๐ฎ๐ ๐ ๐ถ๐ด๐ต๐ ๐๐ฒ ๐๐ต๐ฒ ๐ฃ๐ฟ๐ผ๐ฏ๐น๐ฒ๐บ.
$GOOG (Alphabet) went from being "disrupted" by ChatGPT to genuinely winning the AI race. Gemini grew from 5% to over 20% of GenAI traffic in twelve months, while ChatGPT dropped from 87% to 65%. That's not competing; that's taking share.
Google's TPU strategy is paying off. They're obtaining AI compute at roughly 20% of $NVDA (NVIDIA Corporation) GPU costs, a 4-6x efficiency advantage. Anthropic just signed a multi-billion dollar TPU deal. This isn't rivaling NVIDIA in the open market, but it's real vertical integration no other AI company can match.
The narrative has shifted. But here's my concern:
Search is a phenomenal business. The cost of running a query is about 1 cent, generating 1.6 cents in revenue at 35%+ operating margins. Gemini queries cost 3-6x more to serve. Even if revenue per query held (doubtful), the margin compression is painful.
And it's not just margins, it's volume.
AI gives comprehensive answers, so users search less. Data shows CTR drops 35% when AI Overviews appear, and Gartner projects organic search traffic could fall 50% by 2026. That's margin compression and query compression. A double hit.
The bull case: inference costs are falling ~10x per year. Google's 80% cost reduction since launching AI Overviews is real progress.
The bear case: that deflation needs to outpace both margin and volume compression, and frontier reasoning models aren't getting cheaper as fast as basic inference.
At 33x earnings (vs. a 5-year average of 23x) after a 75% run, the market is pricing in continued Search dominance. If AI queries remain structurally less profitable, that multiple has room to compress.
Google is winning the AI war. The question is whether winning looks like Search, or something fundamentally less valuable.... Show More
Not investment advice. The author may have financial interests in the mentioned instruments.
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Mon May 18 2026 09:45:42 GMT+0000 (Coordinated Universal Time)
