"The drop in Google's stock violates what strikes me as a basic rule of market behavior: If a company beats expectations and raises guidance, its stock price rises - otherwise the stock falls. "Maybe the top question is definitely around compute capacity," Google CEO Sundar Pichai said according to the Journal. "How do you ramp up to meet this extraordinary demand for this moment, get our investments right for the long term, and do it all in a way that we are driving efficiencies?""
"Since Google beat expectations, I was surprised the stock did not rise. To be sure, investors have punished shares of some technology giants that keep doubling their capital expenditures. Google's falling stock may be due to fears AI will cannibalize the software sector - which has lost 30% of its market value in the last three months, noted . Yet Google - whose stock rose 72% in the last 12 months and does not sell much software -- has previously been spared from this sell off."
Google reported nearly $114 billion in fourth-quarter sales and net income rose 30% to $34.5 billion, driven by digital advertising and cloud-computing growth. The company forecast capital expenditures would double to $180 billion, and the stock fell about 5% following the guidance. CEO Sundar Pichai emphasized the challenge of ramping compute capacity to meet extraordinary AI demand while driving efficiencies. Market explanations include investor concern over large capex increases and fears that AI could cannibalize the software sector, which lost roughly 30% of its market value in recent months; Meta showed a contrasting stock reaction to similar capex plans.
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