Episode summary
Google Doubles Down on Spending as AI Fear Returns | Prof G Markets
Prof G Markets
· · Hosts: Ed Elson, Scott Galloway · Guests: Scott Devitt, Jared Holz, Rohan Goswami
Summary
Google’s earnings showed a business still growing quickly, but investors focused on the company’s plan to spend $175 billion to $185 billion on capex this year, nearly doubling 2025 levels. The guest said the selloff was mostly about that spending shock and a broader market reset around AI, where investors are rethinking how much upfront investment is justified before returns show up. He argued that this kind of pressure is especially harsh for software stocks, which the market is now treating as vulnerable to AI disruption even though the long-term winners are still unclear.
The episode also contrasted Eli Lilly and Novo Nordisk in the GLP-1 market. Eli Lilly beat estimates, raised guidance, and saw its stock jump, while Novo Nordisk warned that 2026 sales and operating profit would fall and its stock plunged. The guest said Novo is facing price pressure, market share loss, and a tough transition to cheaper oral drugs, while Lilly appears to be gaining momentum.
A final segment covered the Netflix and Warner Bros. Discovery Capitol Hill hearing, which the guest described as noisy but mostly symbolic. The hearing surfaced antitrust and political concerns, but he argued the real regulatory fight will happen with the DOJ and the White House, not in the hearing room.
Key takeaways
- The guest said Alphabet’s huge $175 billion to $185 billion capex plan is the main reason the stock reaction turned negative despite strong revenue and cloud growth.
- The guest argued AI is forcing investors to reprice software companies because fewer seats, product displacement, and uncertainty could hit enterprise SaaS margins and multiples.
- The guest said Eli Lilly looks stronger than Novo Nordisk because Lilly is still gaining momentum while Novo faces pricing pressure and market-share erosion.
- The guest said Novo Nordisk’s oral GLP-1 launch is promising operationally, but the economics are weaker because the introductory price is only about $150 a month.
- The guest said the Netflix-WBD hearing mattered more as a public record than as a decision point, since the real power sits with the DOJ and the White House.
Notable quotes
“The growth is very strong. You know, search was up 17%”
“they effectively almost double capex in 25 they're almost doubling it again so it's front-footed growth”
“the market is very skittish right now around AI”
“the software companies are predominantly seat licensed businesses”
“The hearing itself, no. But it's an important sort of symbolic gesture”
How the episode opens
Today's number five. That is the official Rotten Tomato score of the new Melania movie, making it one of the worst movies of the decade. Critics have called it a shameless infomercial.
They've called it 2 hours of endless hell, and they've even compared it to Nazi propaganda. However, they all agree it was better than the Emoji Movie. Welcome to Propy Markets.
I'm Edson. It is February 5th. Let's check in on yesterday's market vitals.
The tech selloff dragged on for a second day, pulling the Nasdaq down 1 and a half%. The S&P also declined, though the Dow managed to climb. Uber fell 5% after reporting softer than expected guidance and naming a new CFO.
AMD was among the worst performers, suffering its steepest drop in 7 years after disappointing earnings. And finally, Bitcoin also carried on its slide towards $72,000. Okay, what else is happening?
Google's fourth quarter earnings beat expectations with annual revenue topping $400 billion for the first time ever. It was also the company's second consecutive quarter of more than hundred billion in revenue. That was largely driven by strong growth in its services and cloud divisions.
Its cloud revenue grew 48% year-over-year. However, the company spooked investors with plans to spend 175 to $185 billion this year. That is at least 55 billion more than forecasted.
That would nearly double its capex from 2025. The stock initially fell as much as 7% after hours, but it quickly recovered. Okay, here to help us break down Google's earnings, we're speaking with Scott Devit, managing director of equity research at Wedbush Securities.
Scott, good to see you again.
Hey, Ed. How are you — Doing? Very well. We want to dig into these earnings here. Beat expectations. $400 billion in annual revenue. Just mindblowing at this point.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- google capex
- ai fear
- tech selloff
- healthcare earnings
- software stocks weakness
Companies and tickers mentioned
- GOOGL
- GOOG
- LLY
- NVO
- NFLX
- Eli Lilly
- Novo Nordisk
- Netflix
- Warner Bros. Discovery
Watch the episode
Watch “Google Doubles Down on Spending as AI Fear Returns | Prof G Markets” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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