Alphabet is spending even more to build its AI business.
A lot of Google’s money may be going to Micron.
That’s why Alphabet stock is down today — and Micron stock is up.
Micron (NASDAQ: MU) stock jumped 3.7% through 2 p.m. ET on Thursday, on no obvious good news for the computer memory stock — but I think we can figure out why Micron popped anyway.
Yesterday evening, if you recall, Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) stock reported its Q2 earnings — sales up 24% year over year, and earnings up even more. Unfortunately for Alphabet investors, their company then proceeded to point out that AI is fueling its profits, and that for this reason, Alphabet is spending even more money on capital investment in its AI business.
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How much more, you ask?
Well, about $15 billion more than Alphabet had previously planned to spend — between $195 billion and $205 billion this year alone.
Alphabet investors didn’t like that news at all and sold off Alphabet stock by more than 6% today. Micron, investors, however, are having the opposite reaction — and for good reason. After all, what do you think Alphabet is spending all these billions of dollars on?
That’s right: They’re spending the money to buy AI chips, and they’re spending even more money to buy memory chips — high bandwidth memory and flash memory — to help those AI chips answer AI user questions.
And this, in a nutshell, is why what sounds like bad news for Alphabet stock today is clearly good news for Micron. One of the flushest companies on the planet, with $242 billion in the bank and $185 billion in trailing free cash flow, is turning on the spigots and directing its cash flows in Micron’s direction.
And that makes today a great day to own Micron stock.
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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 Micron Technology. The Motley Fool has a disclosure policy.
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