Bronte Capital Management Pty Limited — Bronte Amalthea Fund on Alphabet Inc.
Thesis
Bronte considers Alphabet exceptionally well managed and credits the company with responding aggressively to the existential threat that AI poses to traditional Google Search through early investments in voice, proprietary TPUs, DeepMind and AI products. At the same time, the fund believes Alphabet's core search advertising model could be severely disrupted as users migrate toward AI assistants that answer questions without traditional search advertising. Alphabet is spending enormous sums to disrupt its own legacy business, with no certainty that the AI investment will generate adequate profits. Bronte therefore continues to own Alphabet but has been trimming the position because the range of possible outcomes is unusually wide.
“We own it. We genuinely have no idea what it is worth.”
Key risks
- AI could displace traditional Google Search and its advertising model
- Massive AI capital expenditure may fail to earn an adequate return
- Alphabet may spend accumulated profits disrupting its own core business without a profitable outcome