Google Steals the Show in AI

0:05Somehow artificial intelligence has stolen the day again. Motley Fool Money starts now.

0:20Welcome to Motley Fool Money. I'm Travis Hoyam, joined by Rachel Warren and John Quast. And guys, as much as we have talked about artificial intelligence in 2025, things actually seem to be gaining momentum. And the big news this week is that Gemini 3.0 came out. This looks incredible. The narrative around Google has changed, or Alphabet, I guess. Their shares are up 5 % today. They're up over 100 % since earlier this year. Rachel, is this a big game changer for Alphabet and for Google? Because this seems like a model that was so far ahead of the competitors, at least on some of the benchmarks, that maybe this is not a disruptive force for Alphabet, but it's actually something they're going to grow with long-term.

1:08Yeah, this is actually a really big deal. And I think this is really exciting for anyone that follows the world of AI and AI stocks. And Gemini 3 is very different from its predecessor in a few ways. There's been a lot of advancements in its reasoning, coding, agentic capabilities. There's been early benchmarks that have suggested that Gemini 3 outperforms other models, whether it's in critical analysis or strategic reasoning. And the models also demonstrated impressive coding abilities. And Gemini Agent is also a major new part of this rollout. It's an experimental feature that can complete multi-step tasks like organizing an inbox or managing a schedule.

1:48Very practical things, right? And that connects to services like Google Calendar and Gmail. Gemini 3 seems to be better at understanding nuance and context, which is really notable. And for the first time, the latest Gemini model is being integrated into core Google products like Search on its launch day. Alphabet has said that Gemini 3 has undergone the most comprehensive safety evaluations of any Google AI model. So, I think this is very exciting, and I'm very curious to see how the use cases for this expand from here. John, there has been a steady drumbeat of AI announcements. Is this one meaningful or more meaningful than other ones?

2:27Or is this just another step in the right direction towards AI doing more stuff for us? I don't know how meaningful this update is, but I will say that there are actionable things for investors today. Rachel already touched on some things about Gemini 3 understanding nuance and context better. To me, that feels like the old iPhone update events where you knew you were getting a better camera. You know that these new models, these new AI models are going to have better understanding. It's going to be smarter. You come to expect that. But what is something that really stands out as different? And I would say for me, the one thing was Google talking about the agentic AI push.

3:09And that's not necessarily new, but I think you are going to hear this more and more from the other AI companies as they release their updated stuff, really talking about agentic, where this is going to start to do more tasks on your behalf as it learns more about you, the user. And I think that that's really important for one big reason is that agentic AI to do that, it's going to need more memory. And so I think it's why you're seeing three out of the top five best performing stocks in the S &P 500 in 2025 are memory stocks. This is a trend that I think has legs to it. They've already sold out basically all of their 2026 inventory for memory, already talking 2027.

3:54This has a long tail to it, in my opinion. John, do you think that Alphabet is going to be able to lean into, you talked about memory. It did seem like one of the things that changed with this model and some of the product announcements that came along with it, is it's going to follow you around your Google experience. So if you use Gmail, if you use search, if you use Google Drive, it's going to kind of get to know you a little bit better, be able to maybe even control those things in certain ways. Is that ultimately from a business model and Google not being disrupted by open AI, is that a step in the right direction if you are an Alphabet investor?

4:32Yes, I think it is. Because when you look at how many fires Google has a little iron in, it's a very busy company. It's a company that has very long reach. And so, as it gets to know you better as you interact with its AI model, yes, it can monetize that in many, many ways. The other big news for the week, we're talking about a vertically integrated company with Google and Alphabet. And I think that's interesting as we're starting to see these business models play out. How is everybody going to work with each other? Google's really doing everything. They're making chips. They're building the data centers.

5:09They're building the artificial intelligence models. They have the products. The other thing to look at from a business model is companies that are more modular or horizontal business models. So this is NVIDIA. It's Microsoft. It's OpenAI. And it's Anthropic. That was the other big announcement for the week. They got$30 billion worth of investments. That's coming from NVIDIA and Microsoft. It's another circular deal where NVIDIA in particular is investing money in Anthropic and that money will eventually come back to NVIDIA through the purchase of chips via Microsoft. But this is kind of a logical step for them to, for Anthropic especially, to move off of something like Google Cloud.

5:51And Google is one of their biggest investors to go to some of these other partnerships and start using NVIDIA chips more in Microsoft Cloud. So, Rachel, what did you think when you saw another huge deal sort of between this handful of players that do seem to be circularly financing each other? I think that this is the new normal in this space, at least for the near future. And I think a lot of these really significant investments, these circular deals in AI, I think it does suggest a future, at least for the near term, that could be dominated by a few major players. Now, I do think 10 to 15 years from now, that paradigm is different.

6:26But for now, I think it's clear, companies that have the enormous capital required to develop and deploy cutting-edge AI, they are really few and far between. And so, this does create a very powerful ecosystem that, at least for now, could make it difficult for smaller competitors to compete. And I think it's leading to consolidation of influence among the largest tech companies. But I do think that's a natural part of the journey. For now, the bigger, the most capital-efficient players dominate. But I do think as time goes by, you're going to see more competitors emerge that could create new opportunities for investors in the industry as a whole.

6:59One thing I'll note, I mean, it's really kind of fascinating to see how this industry has developed through the years. You go all the way back to the early 1980s, there was this massive surge of interest in AI, and there was the AI winter, but AI research continued in the background. And now you have a genuine resurgence in the 2020s. We're in the beginning of the life cycle for the potential of this industry. It's very exciting to think about. Yeah, I mean, the Mag7 is definitely the kingmakers in the AI market right now. They're the ones with the money. They're the ones that are making the deals.

7:31But money isn't the only thing you need to succeed in AI. I really think that, yes, while money helps, all these companies are happy to have it. But I think there's still room for a scrappy startup to come in here with a different model or just doing something differently. Necessity is the mother of innovation. I think that there could be room for an AI startup to bootstrap itself and really shock the world. It's hard to predict when that would happen, how that would happen, but I wouldn't be surprised if it did happen. History does say that the big companies lead the next phase of innovation.

8:10IBM and PCs would be a good example of that, but they aren't necessarily the long-term winners. We'll see if John's right about that. Next, we're going to talk about the fall of Bitcoin and what's going on there. You're listening to Motley Fool Money. In January of 1915, Ernest Shackleton's ship, Endurance, became encased in the ice in the Weddell Sea. Through determination, grit, and savvy, Shackleton would lead his men through a brutal winter, then over hundreds of miles of Antarctic ice, followed by 800 miles across some of the roughest waters in the world. It is one of the most extraordinary and inspirational journeys in the history of exploration.

8:45Find this story and many others at the Explorers Podcast, available wherever you get your podcasts or at explorerspodcast.com. Welcome back to Motley Fool Money. Bitcoin has fallen periodically below$90 ,000. We have seen strategy, the former micro strategy drop. They were once the biggest buyer of Bitcoin, probably you're still the biggest individual buyer of Bitcoin. John, is this a sign that the crypto trade has hit a wall again? We've been through this before, but it seems like the momentum that was happening even just a few months ago has ended in the crypto space. Yeah, it does seem like momentum is ending, and it's ending right on schedule when you'd expect it to, at least from the perspective of Bitcoin.

9:31Bitcoin does have some pretty regular patterns, and it seems to be related to the halving cycle, which impacts the flow of new Bitcoins into the circulating supply. And so it messes up with supply and demand. And while those things are still coming back into balance, there can be big swings in the price of Bitcoin upward. But around a year and a half, two years after a halving event, which we had one in early 2024, things start to stabilize and it seems to peak off. And we can have, in the past, we've had bear markets with Bitcoin with a drop of 80 % or more. And so, you would hope that Bitcoin has grown out of that extreme volatility at this point, perhaps with higher adoption.

10:16But in reality, yeah, the Bitcoin stalling out, the price stalling out, it's pretty much right on schedule. So, I find that interesting. What does surprise me as well, though, you would expect this crypto space to have matured to the point where not all of the alternative coins are trading in pair with Bitcoin, but there still seems to be a lot of directionally tied movement with all of the coins to the price of Bitcoin. Jon, do you think that the maturity of the space in general, and I'm thinking about the business models, maturity of companies like Coinbase, Circle, we have plenty of others, even companies like Robinhood and SoFi getting into the crypto space, does that actually change things or is that not necessarily going to be related to Bitcoin and the tokens themselves?

11:02Yeah, it is very different this time than, say, four years ago or eight years ago when these other cycles have happened with Bitcoin. It's so interesting. We did talk about strategy, and yes, it owns 650 ,000 Bitcoin, so certainly a big player there. But as you brought up, so many crypto exchanges are now publicly traded, blockchain businesses such as Figure. There are many companies with Bitcoin treasuries. There's a lot of more interconnectedness between, let's say, real-world economies and these crypto economies. And so, it will be interesting to see if there is a crypto winter, so-called crypto winter, as we've had in past cycles, how much impact will that have on the real-world economy, but vice versa.

11:46How much is the real world, with Robinhood and all these things, all this new retail investment coming in, does that break the past cycles? It definitely could. Rachel, that does seem to be the elephant in the room, is that, yes, there are these typical cycles with Bitcoin, but they also are really correlated with market cycles. When there's periods of high volatility, when speculation goes up, guess what? Bitcoin goes up. It's not necessarily a great hedge to something like the dollar or interest rates. It's actually more correlated with risky stocks. So what should we take away from that? Yeah, I think it's an interesting point you make because there has been, I think, this idea that's still really widely debated amongst a lot of people in the crypto world of whether Bitcoin and other assets like that can be a hedge against inflation and some of these other macro concerns.

12:36I think we've seen, at least in recent times, that that hasn't necessarily been the case. Bitcoin's price dropped as low as about$89 ,500 on Tuesday. That's a significant decline from its all-time high over$126 ,000 in early October. I do think this decline is part of a wider retreat from speculative assets, both across traditional markets and the digital asset world. I think we're seeing that at play right now. And as you noted, during periods of economic stress or even market crashes, crypto has often demonstrated a correlation with more traditional high-risk assets. And obviously, crypto can be accessed and transferred globally with an internet connection.

13:16So, there's a high degree of liquidity and accessibility, but still that correlation remains. So, I think we're seeing that connection between real-world events and how crypto and stocks are performing. I think we're seeing that now. Could a crypto winter be coming? I'm not really ready to call that. But I think we do need to be realistic about how these assets perform in volatile market environments as compared to stocks. The other big news of the day is retail. We got earnings from Target. We're going to talk about that when we come back. You're listening to Motley Fool Money. Welcome back to Motley Fool Money.

13:48Retail numbers are coming out again. We got numbers from Target and TJ Maxx this morning. The surprising one to me is Target. The results weren't particularly good. The stock's not actually down all that much, down 1%, as we're recording early in the day on Wednesday. But this is something I thought was crazy. The current drawdown in Target stock is at 66.8%. That is worse than the fall in their stock during 2009, during a very deep recession. So, the market does not like what they're seeing with Target right now. Rachel, what is the broad takeaway, both short-term and long-term, for Target? You know, Target's been dealing with a myriad of its own challenges for several years now.

14:31And I think in an environment where certainly consumers are under pressure, but they're also being very selective about where they put their money to work, I think we're seeing that play out. Their Q3 earnings, there was a year-over-year drop in net sales and profits. Comparable sales dropped. Both GAAP and adjusted earnings were down. GAAP earnings per share actually fell about 19%. Target's chief commercial officer noted that consumers are prioritizing gift-giving over other holiday spending, but broadly signaled that they expect a weak holiday spending season, even as they're introducing 20 ,000 or more new items across various categories.

15:07And they're forecasting an ongoing sales slump. Now, contrast that to a business like TJX Companies. Obviously, the business models of these companies are different, but still, there could not be more variance. Yeah, they were very excited in their release about their results. Everything seemed to be better than expected. Absolutely. So, where you've got Target forecasting a week holiday season, sales are down. The CEO of TJX Companies said the holiday shopping season is off to a strong start for us. They said our availability of merchandise is outstanding. We're really excited about the deals that we're seeing.

15:41They're expecting comparable sales to rise between 2 % and 3%. They even elevated their upcoming expectations after their better-than-expected Q3 results. So, a really strong quarter for TGX companies, a very weak quarter for Target. I think what we're seeing is maybe consumer weaknesses persist. But how that plays out to different companies is going to be on a very much case-by-case basis. Jon, the story for Target over the past few years, and the reason that they hit the high in 2021 that they did, was their digital sales. And that sort of encompasses delivery, pickup, all this. They're kind of trying to become an Amazon competitor in that space with quick delivery.

16:22Is there any green shoots there, or is this just sort of a fundamentally problematic time where Target's just trying to find its way? Well, it is a problematic time where Target's trying to find its way. But there are green shoots in the digital businesses, for sure. And I think that's really important. If you are looking at Target stock today, if you're an investor, shareholder of Target, you definitely want to see this. And so, in fact, that's where basically the only green shoots of the business are, are in the digital offerings. And so, like Roundel, it's retail media business, all double-digit growth.

16:56Target Plus, so this is like the marketplace where there's some curated offerings. over 50 % merchandise value growth. I mean, that's really important. And even, I know that we hate to bring it up every single segment, but OpenAI, Target has a new thing with OpenAI. I was surprised to see that they were one of their launch partners with their retail shopping thing. Yeah. It's not exactly who you'd expect to top the list as Target. But yeah, definitely jumping on the bandwagon here with allowing the OpenAI chatbot to help shoppers find holiday gifts. So maybe these are some things that can eventually start to change some of the direction with the business, can start to change the economics of Target's businesses for the better.

17:43And I believe that that is something that can happen, but it does need to keep pushing ahead. Quick question for the end of this. Target's stock is trading for 10x earnings, 11x forward earnings. John, are you interested at that price? I definitely am. And the one that you didn't mention was it's paying out over a 5 % dividend yield now, and it's paid a dividend for over 50 consecutive years. Yeah. I don't know if this is a falling knife or not, but it is interesting. You would think there's got to be a turnaround somewhere. This is such a big name, so much retail space, but we'll see where they go.

18:14As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows The Motley Fool's editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For Rachel Warren, John Quast, and Dan Boyd Behind the Glass, I'm Travis Hoyam. Thanks for listening to Motley Fool Money. We'll see you here tomorrow.

18:50Thank you.