In the relentless horse race of tech valuations, there's a peculiar wallflower at the dance—a trillion-dollar company somehow being treated like yesterday's news. I'm talking about Google, of course.
Look, I've been covering tech markets for years, and I've never seen anything quite like this disconnect. Here's a company printing money quarter after quarter, yet trading at a PE under 20 while its "Magnificent Seven" siblings command valuations that would make a Gilded Age robber baron blush.
NVIDIA at 85 times earnings? The market nods approvingly. Microsoft at 38? Practically a steal! But Google? The collective response seems to be a stifled yawn.
What gives?
It's what I've come to think of as the "boring success penalty" — when a company performs so consistently well for so long that investors simply stop noticing. Google has become financial wallpaper, always there, always functional, rarely commented upon.
The contrast with market darlings is stark (and telling). NVIDIA has its AI chip "we're-the-only-game-in-town" narrative. Apple has cultivated its luxury brand mystique. Microsoft transformed from dusty Windows purveyor to cloud computing juggernaut. Meta... well, Meta rose phoenix-like from its metaverse face-plant.
These are stories investors can grasp—and repeat at cocktail parties.
Google's story? "They make ridiculous money from ads, have tentacles in every digital pie imaginable, and are quietly competitive in AI without making a fuss about it." Not exactly the stuff of Hollywood scripts, is it?
There's something else at work too. Having attended countless earnings calls and analyst briefings, I've noticed what you might call "expectation asymmetry." When Google announces AI initiatives, the market crosses its arms and says "prove it." When others make similar pronouncements? Instant valuation bumps.
The regulatory shadow looms large as well. Antitrust scrutiny in multiple jurisdictions creates the kind of uncertainty that gives institutional investors heartburn.
But here's where it gets interesting for the value-minded investor (if anyone still remembers what value investing is in this market). You're essentially getting a dominant company with multiple growth vectors at a significant discount to peers. The market is pricing Google as if its best days are behind it—a notion that seems, shall we say, disconnected from reality.
Consider this: Google's cloud business grew 28% year-over-year last quarter. That's a $35 billion annual run rate growing faster than most Fortune 500 companies' entire revenue. Yet it's treated almost as a footnote.
The AI situation particularly fascinates me. I've visited Google's AI labs. They've been at this longer than nearly anyone else in the industry. DeepMind isn't exactly a science fair project. But because they didn't rush a half-baked chatbot to market (at least initially), the narrative became "Google is behind in AI"—a take so simplistic it borders on financial malpractice.
This valuation gap creates what investors love to call an "asymmetric bet." If Google shifts the narrative even slightly, multiple expansion alone could drive substantial returns. Meanwhile, you're paid to wait with a business generating cash flow that would make Warren Buffett smile.
I'm not suggesting Google is without challenges. YouTube faces stiffer competition for eyeballs than ever. The core search business isn't the growth engine it once was. And those regulatory headwinds? They're real.
But at current valuations? The market seems to be pricing in a far gloomier scenario than the fundamentals warrant.
Sometimes the most obvious opportunities are hiding in plain sight, overlooked precisely because they lack... what should we call it? Narrative pizzazz? The tech market, like high school, often confuses popularity with value.
Google may not be sitting at the cool kids' table right now, but it might just be building the most durable business of them all.
And in markets, as in life, the overlooked ones sometimes offer the most interesting conversations.
