Alphabet, Meta Shares See Contrasting Fortunes Amid AI Push
CNBC reports that Alphabet (Google) shares surged 14% after the company reported better-than-expected revenue and profit in the first quarter of 2024, announcing its maiden dividend and a $70 billion stock buyback plan.
In contrast, Meta (Facebook) shares plunged by nearly 19%, wiping out over $200 billion in market value, following news that the company is pouring tens of billions of dollars into artificial intelligence (AI) but has yet to deliver a breakout product.
Thus, while Google still lags behind Microsoft in the AI race, it has managed to release some notable products, bolstering revenue and lifting its market capitalization beyond $2 trillion.
Meanwhile, Meta, whose fourth-quarter dividend payment in 2023 coincided with positive financial performance, has now laid bare its weakness: a lack of standout products and relative tardiness in AI.
Some analysts even view Google’s initiation of a dividend, similar to Mark Zuckerberg’s action in late 2023, as a slap in the face for Meta.
A Shot of Confidence
Contrary to Mark Zuckerberg’s attempts to appease investors by urging patience, Google has injected a shot of confidence into shareholders, indicating continued growth driven by AI investments.
Alphabet’s revenue surged by 15% to $69.79 billion, its biggest increase since early 2022, fueled by the integration of AI tools into its business operations and product offerings.
Accordingly, Alphabet has declared a dividend payment of $0.20 per share and authorized a $70 billion share repurchase program.
Google’s total cash and cash equivalents stood at $108 billion as of the end of the first quarter of 2024, not far off the $110.9 billion recorded in the same period of the previous year.
Its net income jumped by 57% year-on-year to $23.66 billion.
Google’s overall advertising revenue increased from $54.55 billion in the first quarter of the previous year to $61.66 billion in the current year’s first quarter. YouTube advertising revenue alone reached $8.09 billion, exceeding investors’ $7.72 billion forecast.
Notably, Google’s cloud computing business grew by more than four times, generating $900 million in revenue. The company attributes this to its investment in AI and the subsequent infrastructure enhancements, which have driven customer demand for its cloud services.
It is worth reiterating that AI products require substantial cloud computing resources for development and operation.
Google’s cloud computing unit currently ranks third in the market behind Amazon and Microsoft, but analysts widely predict that AI will help it narrow the gap with its rivals.
Despite investing $12 billion in capital expenditures, primarily in AI, Google remains optimistic due to its strong advertising and YouTube revenue streams.
According to eMarketer, if Google successfully integrates AI into its search engine, sparking another wave of adoption similar to ChatGPT, it could potentially generate an additional $200 billion in revenue this year.
Source: CNBC
