E.g., if Google doesn’t invest in AI then AI will kill their search engine business. A lot of us don’t love the Google search AI Overview but now they’re competing directly with ChatGPT, and they’re essentially not a search monopoly anymore.
One way to look at a bust AI investment is the destroyed value of the stock like you mentioned, but perhaps that’s somewhat hindsight-biased? Perhaps the reality for some companies is that if they sit on their hands and do nothing they lose 40% of their company value and if they spend a ton of money on AI they lose 20% of their company value. Of course we don’t know the outcome yet.
AI has already killed their search biz. No one even clicks on results anymore. How many ads are they clicking on these days?
Fine, but how much revenue can be derived from this? I'd posit not much so long as Google sticks with CPC pricing.
AI results are their own citation- and context-free reality.
If Pepsi pays Google $100M for every statistical +10% they give recommendations of Pepsi over Coke in Gemini... how would anyone ever know?
Google hasn't done that obviously yet, because they have the cash to weather the choppy PR waters around public AI perception, but once AI is normalized it's going to be trivial to turn the knob on managed models.
Especially free ones, served cost efficiently by Google's infra backend, pushed via the most widely used phone OS and browser in the world.
The monetization (and user profiling) opportunities make web tracking and ads look like kids' toys.
You have a nice slogan, but doesn’t hold up
We could have made the same statement about landline telephones or cable television in the past.
If you’re a retireer yeah you just want a steady dividend (or buyback).
But i mean for a 401k that won’t be spent from for 20+ years you absolutely want business to be investing into themselves. Otherwise go buy gold.
Inside a 401k dividends get reinvested, on top of that companies value income go up with inflation simply because they’re getting a similar cut of larger numbers.
As a shareholder I'd rather them take the $100bn and invest it in growing the business further and generating $200bn. That's the more likely outcome anyway.
Most shareholders in Time Warner, for example, regretted giving 50%+ of the company to AOL shareholders, even if everyone was correct that 'winning the Internet' was the key to growing the business.
If you or your retirement is a shareholder in one of these companies, you'd rather they return $100 billion to you with boring buybacks or dividends than put it in an exciting AI investment that returns $1-$10 billion. Even though it didn't end up completely worthless, it's still a bad investment.
> If AI blows up in Microsoft or Google’s face they’re just going to write it off and spend a decade paying zero income tax
As a shareholder, you'd also rather they return $100 billion to you than put it in a bad investment that returns $0 -- even if that bad investment lets them write off $20 billion in taxes over the next 10 years you'd still be $80 billion better off.
> how much it’s actually going to matter. If AI blows up in Microsoft or Google’s face
An AI winter shouldn't be an existential threat to these companies -- but "the share price is 10% - 20% lower than the counterfactual where they didn't make these questionable investments" still represents a lot of lost wealth for shareholders -- billions (or trillions for the industry as a whole). A lot of that wealth is the hands of ordinary people, often through retirement investments in index funds.