Michael reads a Google CFO statement about negative free cash flow and supply-constrained AI demand. Despite Google's stock being down 18% after a strong quarter, he argues the hyperscalers won't cut spending unless stocks fall ~45%. ✦ AI generated
Michael Batnick · The Compound · 2026-07-29 · original ↗
starts at this moment · 31:05
She said, 'We're still in a supply constrained environment. ... the demand still outpaces that investment. We are just like the rest of the industry working in a supply constrained environment.' ... Stocks down almost 20%. ... I don't think that Sundar is going to say, 'Oh our stock is down 25%. We have to completely change everything.' I think if it's down 45, yeah, that's different. But we have a long way to go.
verbatim transcript · starts at 31:05
31:06hyperscaler AI world. Uh, >> by the way, my my um Anchorman meme from last week or two weeks ago was kind of spot on. They're all turning on each other. >> I don't believe you. >> Open source versus closed source versus a fighting game, right? They they are all turning on each other. >> Yeah. >> And I I have no You always make fun of me for not taking a stance, but the
31:29whole open source versus closed source versus >> I don't care. Okay. I really don't care. Is that okay to have a stance? >> Considering that you just discovered Apple Pay, I'm not surprised you don't have a stance on this. >> I I I don't care. >> Um, okay. She was asked about uh about their capex because they raised it again. They just reported a negative free cash flow
31:52for the first quarter. I don't know if ever, but >> I think it was the first time ever negative free cash flow. Yes. >> She said, "We're still in a supply constrained environment. I think we've said this now for multiple quarters in a row. We are seeing very strong demand both from external cloud customers as well as across the business. Our goal is to invest as long as we see an
32:10attractive return on that investment. As Sundar mentioned earlier, we do take a long-term view. So, we take multi-year view at what the needs are as well as focus on next year in the near-term and building aggressively to meet those demands. As you've seen, while we have increased our capacity quite significantly over the past three years, the demand still outpaces that investment. We are just like the rest of
32:29the industry working in a supply constrained environment. >> Stocks down almost 20%. >> Google is down 18% draw down right now. >> They had a monster quarter. I was surprised at the degree of the selloff. Um I think the cloud was up 82% year-over-year. Revenue was up uh what was it 14 14% or YouTube was up 24%. I whatever maybe I'm getting the numbers a little bit wrong, but uh but investors
32:56are taking a investors are taking uh they're starting to push back against all the spend and and the hyperscalers are saying we're still going, >> right? We don't >> we're not slowing down. >> How long did this game of chicken last? >> I don't know. >> Stock market dependent. >> I I think I think we have a long way to go. I don't think I don't think that
33:14Sundar is going to say, "Oh our stock is down 25%. We have to completely change everything." I think if it's down 45, yeah, that's different. But we have a long way to go. >> Yeah, I know. I I think 40%'s kind of line in the sand when you start going, "Okay, what are we doing here?" I don't know. >> Uh, all right. Speaking of earnings, um, Blackstone
33:35was asked about BCR. Obviously, they have $324 billion in the private wealth channel. >> Okay. It's a lot of money. >> A lot of money. and they said that uh redemptions were elevated in in uh in April and May and they're starting to they're starting to to slow down. We really haven't heard much about private credit in a while. Wasn't some blue has been in the news.