Ron Josey, Citi senior internet analyst, joins 'Squawk Box' to discuss the AI enthusiasm around Google Gemini, reports of Meta considering Google's AI chips in its data centers, state of AI competition, and more.

The release of Open AI's ChatGPT has accelerated the development of artificial intelligence and warnings about its impact on society.

Rise of AI

Google's shares have risen following reports that Meta is considering using Google's Tensor processing units in its data centers by 2027. The Gemini AI model is currently seen as a leader in the field, contributing to growth in both Google's search and cloud businesses. According to Citi's senior internet analyst Ron Josie, Gemini is reinforcing Google's core advertising business, which remains the primary source of the company's cash flow.

The discussion highlighted the competitive landscape among major AI model providers, including Google, OpenAI, and Anthropic, as well as the growing demand for AI chips and cloud services. While Google's cloud platform is entering a new phase of growth, Meta and Amazon are also performing strongly in the sector. Despite increased competition, Josie maintains Meta as his top pick among the leading tech firms.

Gemini gives Google continued strength in core advertising business

Shares of Google are rising again this morning, this after yesterday's 6% gain. Reporting the information saying that Meta is considering using Google's Tensor processing units in its data centers in 2027. Now, Google rising, NVIDIA pulling back on that news. Joining us right now is Ron Josie, Citi's senior internet analyst. Good morning to you. You know, it feels like every other day, one of these models is leapfrogging the other. In the moment right now, Google's Gemini seems to be ahead. Anthropic just came out with its own large language model. So let's break apart the news. There's the model issue, which a lot of people are excited about. And then there's this other news on the chip front, which is bigger to you? And then you have search, by the way, growing. So maybe that's even a TAM expander. So you've got the model doing better. You've got the chip potentially being used to sell off-premises. And then you have more search doing better. Which one's bigger? I think the model drives much of what Google's business is, both on the search and the Google Cloud side. And so as of now, we're actually pretty excited about what's going on within Gemini, the Gemini family of products that are happening right now. So when you think about the model issue, and this is something we've been talking about now for weeks, if not months on end, I imagine, you know, Gemini is now ahead. As I said, Anthropic just came out with its own model yesterday. I imagine we'll get a new ChatGPT at some point soon. How do you see the issue either of memory persistence or other things? What is the wall, the garden? You know, you had someone like Mark Benioff say that he spent the last two years using ChatGPT practically every day. Now he says he's using Gemini. Does that mean that the user is just going to jump to whatever the best model is at any one moment? Or do you think that there's a bigger moat around these businesses? You know, Andrew, I think there's a bigger moat around these businesses. There's only several model companies that have the size and scale that are offering these types of services. Google's one of them. OpenAI with ChatGPT, another. You mentioned Claude earlier, and there's several others. Grok and what Matt is doing with Lama, of course. But really, you know, Google's ethos and what they have been historically is primarily a search consumer internet company. Yes, Google Cloud is doing better. Gemini is now giving them more of a leg up on the search business. And I think a big unlock from our perspective, post-3Q earnings, is that search is now growing sequentially. And so not only are people using Google more, more often, they're doing it in a way where they're getting the answers right away. And then you have Google Cloud, which is, you know, delivering backlog of growth of 50 plus billion dollars on a sequential basis. And so I think from a Google perspective, look, at the end of the day, the majority of cash flows come from the core advertising business, primarily driven by search. I think Gemini gives you that gigantic, really continued strength in that business. And now, you know, not only are they fighting back, they're on the front foot to a certain extent from a competitive perspective there. To be clear, it always takes a while for consumers to sort of change habits. And that's what's been so fascinating with OpenAI and ChatGPT and the rise there in the 800 million weekly active users. And so, you know, competition is growing. There's only a handful of companies with a vertically integrated stack with the cloud. Google is certainly one of them, OpenAI being another. And consumers will migrate to the best experience, but also use multiple experiences. Well, Ron, here's the thing that I always thought. Look, I thought from day one, this should be Google's to take, to be honest with you. Because, look, I'm a Gmail user. There's hundreds of millions of people who use Gmail, Calendar, all those applications. It should know the most about you, assuming that you opt in and all of those things. Therefore, it should be able to help the most personalized information in terms of what it's bringing back to you. Having said that, at least for the past couple of years, it's felt like ChatGPT has done a better job of that. I don't disagree with you. It was theirs to take. I think they were a little surprised if we go back about two and a half years or so with what was happening. What has happened? Answer Search is now an answer engine. Google is now, I think, seeing actually queries re-accelerate in terms of overall growth. That's across their AI overviews, AI mode, and now Gemini. Frankly, not to switch the topics, but then where we started, we have a whole new business that's now in this next level or next phase of growth, and that's their cloud platform. You have a lot of things happening here within Google that I think that's to be excited about. When you think about the chip piece of it, not only are we seeing investors get excited about Google because of this potential deal with Meta, but you look at Nvidia's stock and it's down on the back of this news. Does that make sense to you longer term? Yeah. From a chip perspective, I'm certainly not the expert there, but frankly, it's a gigantic market. One of the things that Google does have from a benefit perspective, they've got the model, they've got the chip, they've got a delivery mechanism with Google Cloud. Now, if they're opening up to more, it's pretty interesting. One thing that seems to be for sure here is that the demand side continues to grow. When you see that backlog growing as fast as it is, when you see other companies in this industry growing as fast as they are, whether that be being chips or via the cloud perspective, and I'll throw Amazon in there as well, there's a huge opportunity for that to continue. So we believe that this demand can continue here. If you had to rank the companies that you cover right now, buy to hold to sell, what are they? Mag seven. Yeah, well, there's a lot. I cover, thankfully, three of the mag seven, and frankly, in the shorter term here, Google is firing on all cylinders. It's actually fascinating that Amazon, which delivered a phenomenal quarter in our perspective, is now trading at a cheaper multiple, maybe first time ever, than Google is. We still like Meta quite a bit here. Meta, we need to know a little bit more about their plans, about their strategy. I think we're going to get that here in 26th. But the core ranking recommendations engine at Meta, in addition to their usage, continues to grow. And that gives them a gigantic mode on their core business too. So frankly, here in the shorter term, all three are performing really well. And so I think I'd put it in that order in the short term. But officially, Meta remains our top pick.

Firefighting and rescue missions continued into Thursday for a second day after a massive fire broke out in Hong Kong, gripping a complex of seven high-rise residential buildings. At least 55 people were killed and dozens more were injured in what is the worst fire to hit the territory in decades.

Tai Po District

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Washington

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Brazil's Supreme Court on Tuesday ordered far-right former president Jair Bolsonaro to begin serving a 27-year sentence for plotting a failed coup, after he exhausted all appeals.

Rio de Janeiro

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Tsim Sha Tsui

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The head of Sudan's Rapid Support Forces (RSF), General Mohamed Hamdan Dagalo, said late on Monday (November 24) that his paramilitaries would immediately enter into a three-month humanitarian truce in its conflict with the country's armed forces.

Khartoum

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Kyiv

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Darfur

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Chauncey Billups, who was serving as head coach of the Portland Trail Blazers until his suspension, pleaded not guilty on Monday to charges related to alleged rigged high-stakes poker games.

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A federal judge has dismissed the criminal cases against former FBI Director James Comey and New York Attorney General Letitia James on the grounds that Lindsey Halligan, the interim U.S. attorney who secured their indictments, was unlawfully appointed to the role.

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Nha Trang

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About 50 schoolchildren aged 10–18 who were abducted in Niger state, Nigeria, have escaped, authorities confirmed. They fled individually between Friday and Saturday, according to the Christian Association of Nigeria, which runs the school. Officials continue to track those still missing.

Niger

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The first G20 summit to be held in Africa has been labelled a "triumph of multilateralism," as leaders from the world's more powerful economies came together in Johannesburg. South African leader Cyril Ramaphosa used his presidency to highlight the priorities of Africa and the global south.

Gemini gives Google continued strength in core advertising business

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