Alphabet Buys Wiz for $32B, Sells AI Stock

Alphabet is one of the world’s biggest spenders on artificial intelligence. In its Q2 earnings call, CFO Anat Ashkenazi announced plans to spend $85 billion this year-up from $75 billion-of which two-thirds will go toward servers for training and running large language models. So it goes.

Meanwhile, Alphabet’s CapitalG independent growth fund, managing $7 billion in assets, has been an early investor in many major companies (16 of which have gone public). As of the end of Q2, the fund held 36 publicly traded stocks-a drop from 40 after divesting several holdings. One notable exit was from a major AI stock that CapitalG first backed during its Series C in 2015. Instead, Alphabet’s parent company has agreed to acquire a five‐year‐old startup in the same space for $32 billion. So it goes.

CapitalG recently offloaded its remaining shares of CrowdStrike. At the end of 2023, it held 1.3 million shares-accounting for 15% of its marketable equity portfolio. As the stock climbed in 2024, the team began selling off their shares. Then, that summer, CrowdStrike suffered a massive outage that sent the stock plummeting over 40% from its high. Once prices rebounded, selling resumed. Valuation was the main driver behind the decision, and Alphabet’s March acquisition of competing cloud security firm Wiz may have pushed the team to complete its divestment. So it goes.

CrowdStrike is still licking its wounds from last July’s outage. Its operating margin has taken a hit; the company ramped up sales and marketing expenses and offered discounts for bundled modules, causing its Non-GAAP operating margin to fall from 23% to 18% year over year. Yet, with the outage behind it, CrowdStrike is positioned to reclaim its margins and accelerate earnings growth. Revenue is surging 42% annually, buoyed by nearly half of its customers buying at least six modules-a fact that increases switching costs and underscores vendor consolidation trends. So it goes.

CrowdStrike is also venturing into agentic AI with its new Charlotte platform. The system is designed to take swift action against security threats, building on the company’s machine learning algorithms. Despite its robust revenue growth, its stock trades at roughly 27 times sales-making it the priciest option in cybersecurity. And with Alphabet’s planned acquisition of Wiz, CrowdStrike’s stronghold in cloud security may soon be diluted. So it goes.

Google Cloud, Alphabet’s third-largest public cloud platform, is racing to catch up with its competitors. Despite rapid growth, it trails Microsoft’s Azure, which boasts a Q2 run rate of $75 billion compared to Google’s $54.5 billion. With Microsoft outpacing the field, Google Cloud isn’t likely to close that gap anytime soon. So it goes.

Integrating Wiz’s cloud security solutions into Google Cloud could open a new revenue stream and boost customer loyalty. However, overdoing the integration risks alienating customers who prize Wiz’s neutrality. Finding the right balance will be crucial for Alphabet. So it goes.

Wiz stands to benefit considerably from Alphabet’s ownership, gaining enhanced access to capital for investments in artificial intelligence-essential for identifying and closing security gaps. Over time, Google Cloud could capture more contracts in high-security sectors like government and banking. Despite the eye-watering $32 billion price tag, the acquisition is justified by Google’s $95 billion in cash and marketable securities. So it goes.

Alphabet’s shares look attractive at a forward price-to-earnings ratio below 20. While potential regulatory pressures loom, investors are snagging a solid value. Should the Wiz acquisition receive regulatory approval, it will likely boost the company’s fastest-growing segment even further. And here we are, trading in the cosmic roulette of Wall Street, where fortunes rise and fall with the flick of a market ticker. So it goes. 📈

2025-08-11 04:56

Read More