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Alphabet (NASDAQ:GOOG | GOOG Price Prediction) continues to be an AI force, even as shares come in due to broader market fears and distaste for hefty CapEx. While it’s easy to start taking some profits off the table on shares of Google as the Magnificent Seven trade continues to fly south, I do think that by doing so, especially at today’s ridiculously low valuation multiples, one could risk major upside moves and the occasional surprise breakthrough. At the end of the day, Google is moving fast with numerous innovations, many of which could change the AI landscape or rewrite the AI playbook.
There are some powerful innovations going on behind the scenes, from Waymo to quantum AI and everything in between. More recently, Google reminded us of why it’s important to stay the course with the stock, even when it seems like the past years’ gains are about to be wiped out.
Google’s latest breakthrough is a shocker that few saw coming
With the firm showing off its TurboQuant breakthrough, it feels like Google’s research team has found a way to make big money when it comes to memory. When the market is put off by high CapEx and the sheer cost that it’ll take to construct next-generation AI data centers, it’s efficiency breakthroughs that stand out as having the potential to bring the sleepy AI trade back to life.
Undoubtedly, there’s a bit of a memory wall, and the only way to get through it may be to get creative. Of course, algorithmic efficiency might be the way to go as firms look to power ahead in the AI race in an aggressive and less-expensive manner.
Could it be that Google can innovate its way to spend less on critical hardware without pulling its foot off the AI gas?
Possibly. Google’s TurboQuant feels like a true game-changer, and the shockwaves have already spread through the shares of the memory makers.
Indeed, Micron (NASDAQ:MU) stock has certainly felt the rumbles of late, as the market digests the full extent of the impact. TurboQuant reportedly reduces memory by six times while spending attention computation by eight times without accuracy loss. That last one is big since the last thing we need is more AI hallucinations.
In many ways, it feels like magic that Google has found a way to do more with less amid the memory supercycle. And its efficiency focus may very well change the memory supercycle as we know it, perhaps in unexpected ways. Of course, just because a model is six times more efficient regarding memory consumption doesn’t mean memory chip demand will fall by a proportional amount.
Greater memory efficiency could mean more demand
According to Jevons’ paradox, which Morgan Stanley analyst Shawn Kim highlighted, greater efficiency stands to pave the way for greater usage. And we may very well see even more demand for memory chips. Either way, Micron and the other memory makers may be an even better buy after Google’s algorithmic breakthrough.
While it’s tough to gauge just how much the memory market stands to be impacted. Kim is right on the money to highlight that potential for such a breakthrough to add even more fuel to the memory boom. Either way, I do think that Google remains the last Mag Seven titan that investors should think about taking profits in.
Whether it’s the potential for further AI efficiency breakthroughs or the release of more cost-effective models of Gemini (and Veo), there’s no shortage of potential upside surprises to be had from the $3.6 trillion company that might be first back to all-time highs if the Mag Seven is ready to move on.
Google might be spending big money on CapEx, but it’s also investing heavily to win the AI efficiency race. And the long-term savings from such efforts, I think, may very well make the front-loaded spend more than worth the price of admission.
