Why Alphabet Stock Popped Today
Key Points
Palantir and Alphabet are partnering to improve artificial intelligence processing of data in Google Cloud.
Technical wonders notwithstanding, it's not clear this partnership will improve free cash flow at Google.
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Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) stock jumped 3.5% through 12:45 p.m. ET Thursday on -- what else? -- new developments in artificial intelligence.
Alphabet and Palantir (NASDAQ: PLTR) announced today "a multi-tiered partnership" integrating Google's BigQuery cloud data warehouse with Palantir's Foundry data operating platform, enabling the two products to work better together. The companies are likewise working to connect Palantir's Artificial Intelligence Platform (AIP) with Google's Gemini large language model (LLM).
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Coming on the heels of yesterday's news that Gemini more than doubled in size over the past year, passing 900 million monthly active users, you can see how this might get investors excited about Alphabet stock.
Image source: Google.
Palantir and Google: better together?
Commenting on the Palantir partnership, Google Cloud VP Satish Thomas predicted the integration of the two products "helps turn raw data into AI-driven insights that inform real-world, operational execution." That reads a lot like techno-speak, but the gist seems to be that by integrating the two products, data stored in Google Cloud can be more easily exported to Palantir for processing with that latter's AI tools.
Assuming the data flows both ways, one could surmise the next effect will be to allow Google Gemini queries to explain the results of Palantir's processing.
What it means for Alphabet stock
Even harder than explaining what's going on behind the scenes here is gauging what it means for Google in dollars and cents. Will this tie-up with Palantir grow Alphabet's profits?
One would presume so, but I remain leery. Despite reporting more than $160 billion in "profit" over the past year, Alphabet generated just $64.5 billion in real free cash flow as capital spending continues to swamp cash generation.
This is the No. 1 reason why I don't own Alphabet stock today -- and won't be buying into today's rally.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Palantir Technologies. The Motley Fool has a disclosure policy.
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