Needham analyst Laura Martin reiterated Alphabet Inc (NASDAQ:GOOGL) Google with a Buy and a $210 price target.
GOOGL is Martin's top large-cap stock pick for 2024, backed by a more robust macro backdrop, record political ad spending, data advantages, and Generative artificial intelligence integrations.
The analyst highlighted Google's compelling long-term position, backed by the company's global ad revenue and digital market moat. Martin also highlighted YouTube as a rapid subscription revenue growth driver. The analyst expects Google's proprietary large language models (LLMs), with thousands of small and medium-sized businesses developing apps on these platforms, to be its primary upside value driver over the next 3-5 years.
Martin listed critical takeaways from her conversation with the CEO of a GenAI infrastructure company that flagged Google and Amazon.Com Inc (NASDAQ:AMZN) as the most likely winners of the current arms race to build out GenAI tools, features, and capabilities. Companies have invested $1.3 trillion over the past 12 years to build the public cloud. Amazon and Microsoft Corp (NASDAQ:MSFT) took six years to achieve profitability from their cloud business. GenAI is much bigger; the analyst highlighted the CEO's view.
The CEO projects $5 trillion—$6 trillion in total capital expenditure required for new data center infrastructure to support GenAI. He expects hyperscalers to spend $250 billion in 2024 on GenAI infrastructure projects, five times higher than the $50 billion annually they spent six years ago to build their cloud infrastructures.
Martin noted the CEO's view that GenAI has already generated over $100 billion in revenue after 18 months. He expects GenAI business demands in 2024 to exceed GenAI capacity by 2x.
Martin projected fiscal 2024 revenue and EPS of $346.40 billion and $7.62.
Price Action: GOOGL shares traded higher by 1.37% at $165.19 at last check Monday.
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