Capex, D&A, $707 Billion in Commitments Make Google a Very RISKY Stock to Buy!

Value Investing with Sven Carlin, Ph.D.•Jul 28, 2026

Summary

Sven analyzes Google's latest earnings, noting a 24% revenue growth and an 82% surge in Cloud revenue. However, Sven highlights a major red flag: Capital Expenditure (CapEx) is projected to reach $200-$205 billion, potentially representing 50% of revenue compared to the historical 10%. Sven expresses concern that massive depreciation and amortization costs—potentially $50 billion or more annually—will crush net income even if revenues continue to grow at high rates. Sven concludes that the stock currently represents an AI gamble with high risk and low potential returns.

Sven mentions the following stocks:

**GOOGL (Alphabet/Google):** Sven argues that the stock is currently a risky bet rather than a value investment due to the aggressive spending on AI infrastructure. Sven suggests that even if revenue doubles in five years, the accompanying depreciation costs could leave the company with minimal profit. Sven states that the stock does not offer a margin of safety and suggests waiting for a much lower price, specifically mentioning that Sven would be interested if the stock price fell by 50%.

**ORCL (Oracle):** Sven briefly compares Google's situation to Oracle, noting that Oracle is also investing heavily in similar AI infrastructure while remaining highly leveraged. Sven points out that the market has been skeptical of Oracle's business model for some time. Sven suggests that Google might face a similar market reaction as investors realize the impact of massive capital spending on profitability.

Mentioned Stocks

GOOGL

Sentiment: SELL

Reasoning: Sven argues that the massive shift in CapEx from 10% to 50% of revenue creates an unsustainable cost structure through depreciation. Sven believes the current price of Google is too high and lacks a margin of safety. Sven would only consider an entry if the stock price dropped by 50%. Sven describes the current situation as an AI gamble that Sven is not willing to take.

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ORCL

Sentiment: SELL

Reasoning: Sven mentions Oracle as a comparison for companies investing heavily in AI while being highly leveraged. Sven notes that the market has penalized Oracle's stock for Sven's view of a flawed business model over the last year. Sven views this as a warning for Google investors regarding future profitability.

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