Alphabet(US:GOOG) The Motley Fool·2025-12-01 06:05Core Viewpoint - Alphabet is positioned as a leader in the AI infrastructure race, having developed its capabilities over the past decade, and is expected to widen its lead in the AI sector moving forward [2][9]. Group 1: AI Development and Infrastructure - Alphabet has been working on AI since 2011, establishing the Google Brain research lab and developing the TensorFlow framework, which is now widely used for training large language models (LLMs) [3][4]. - The company acquired DeepMind in 2014 and merged it with Google Brain in 2023, which contributed to the development of its Gemini LLM [3]. - Alphabet released its TensorFlow machine learning library in November 2015 and introduced tensor processing units (TPUs) in 2016, designed specifically for machine learning and AI workloads [4]. Group 2: Competitive Advantage - Alphabet's TPUs are now in their seventh generation, providing a significant performance and cost advantage over competitors who are just beginning to develop their own AI ASICs [5][6]. - The company benefits from a structural cost edge due to its combination of custom AI chips and foundational AI models, creating a flywheel effect that enhances its competitive position [6][7]. - By utilizing TPUs for training Gemini, Alphabet achieves better returns on capital expenditure compared to competitors relying on Nvidia's GPUs, allowing for reinvestment into further improvements [7]. Group 3: Market Position and Future Outlook - Alphabet's ownership of a world-class AI model enables it to capture the entire AI revenue stream, unlike competitors such as Amazon and Microsoft, which depend on third-party LLMs [8]. - The upcoming acquisition of cloud security company Wiz is expected to enhance Alphabet's ecosystem advantage [8]. - The company is positioned to be the big winner in the next phase of AI infrastructure due to its vertical integration and custom AI chips, making it a long-term buy despite its recent strong performance [9].