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GOOGL
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20 hrs

Google, Meta and Amazon are facing an expensive AI risk that nobody is paying attention to

1. Big Tech, including GOOGL, plans $274 billion in capex for AI infrastructure. 2. Escalating depreciation costs may impact profit margins as AI revenue grows slowly. 3. Bank of America sees a $7 billion discrepancy in GOOGL's 2027 estimates. 4. AI infrastructure overbuilding risks commoditizing AI products and decreasing profits. 5. GOOGL's revenue growth may fall behind rising depreciation and amortization costs.

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FAQ

Why Bearish?

High capital expenditures coupled with rising depreciation could squeeze GOOGL's profit margins, similar to previous cycles where tech large caps faced severe price corrections due to overinestment.

How important is it?

The article outlines significant risks for GOOGL's financials amid heavy AI investments, indicating a need for closer scrutiny by investors.

Why Short Term?

The anticipated effects from rising depreciation costs are expected to manifest soon as FY 2024 progresses.

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