Two pieces of great news for Google; AI-related spending and stocks are propping up our entire economy; Joby Aviation flies at the Dubai Airshow – and Archer Aviation doesn't
1) One of my longtime favorite stocks, Alphabet (GOOGL), jumped 6.3% yesterday and was up as much as 3% this morning on two pieces of great news.
First, this story from the Wall Street Journal captures the enthusiasm around Google's new Gemini 3 AI model and how it's surpassing its rivals:
With the release of its third version this week, Google's Gemini large language model ["LLM"] surged past ChatGPT and other competitors to become the most capable AI chatbot, as determined by consensus industry-benchmark tests.
The results represent public validation for Google employees who, for months, have been conducting their own, personal tests of the model – asking it for jokes, trying to stump it with math problems – and coming away convinced they had something that would finally tilt the LLM field in the company's favor.
Salesforce (CRM) CEO Marc Benioff's post on social platform X is typical of the response:
The second piece of good news was a report last night by The Information that Meta Platforms (META) may sign a multibillion deal to buy Google's chips to help power its data centers:
For years, Google has limited its custom tensor processing units (TPUs) to its own cloud data centers, renting them out to companies running large-scale AI workloads. But according to The Information, Google is now pitching the chips for deployment inside customers' own data centers, marking a major shift in strategy.
One of those customers is Meta Platforms Inc. The parent of Facebook and Instagram is reportedly in discussions to spend billions of dollars to integrate Google's TPUs into its data centers starting in 2027, while also planning to rent TPU capacity from Google Cloud as early as next year. Meta currently relies primarily on Nvidia GPUs for its AI infrastructure.
The article highlights the importance of this development for Google:
If the deal proceeds, it would be a significant validation for Google's hardware ambitions. The company has told prospective clients – ranging from high-frequency trading firms to large financial institutions, that installing TPUs on-premises can help them meet stringent security and compliance requirements for sensitive data, The Information reports.
The stakes are enormous. Executives inside Google Cloud have suggested that expanding TPU adoption could help the company capture up to 10% of Nvidia's annual revenue, a haul worth billions.
No wonder GOOGL is up and Nvidia (NVDA) was down as much as 7% this morning.
2) There are broader implications of the AI arms race... As this WSJ story notes, AI-related spending and rising AI stock prices account for much of the economic growth – and perhaps even consumer spending – that's propping up our entire economy:
The turbulence that hit stocks tied to artificial intelligence last week highlights a broader risk to the economy. Growth has become so dependent on AI-related investment and wealth that if the boom turns to bust, it could take the broader economy with it.
Business investment in AI might have accounted for as much as half of the growth in gross domestic product, adjusted for inflation, in the first six months of the year. Rising AI stocks are also boosting household wealth, leading to more consumer spending, especially in recent months.
"It's certainly plausible that the economy would already be in a recession" without the AI boom, said Peter Berezin, chief global strategist at BCA Research.
These next two charts from the article are particularly interesting. The first shows the rising contribution to total GDP of AI-related investment:
And the second shows that fixed investment in data centers has tripled in the past three years:
3) To fund this surge, the five big AI tech companies have issued massive amounts of debt in the past few months, as The Week in Charts' Charlie Bilello shows in this X post:
5) Another one of my favorite stocks, Joby Aviation (JOBY), also jumped 6.3% yesterday after it successfully flew its innovative electric aircraft at the Dubai Airshow. You can watch a video of it here:
The company noted that "we are on track to launch services in Dubai in 2026." I plan to fly to Dubai and be one of the first passengers!
Meanwhile, the No. 2 company in the space, Archer Aviation (ACHR), had a model of its aircraft on display but didn't fly it at the airshow. You can read more about it in this report from Hunterbrook Capital, a fund that's long JOBY and short ACHR.
A friend of mine in the industry confirmed that Archer wasn't allowed to fly: "Their aircraft couldn't meet the requirements of the airshow."
Best regards,
Whitney
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