{"id":20060,"date":"2026-02-09T02:57:21","date_gmt":"2026-02-09T02:57:21","guid":{"rendered":"https:\/\/microvibenews.com\/?p=20060"},"modified":"2026-02-09T02:57:21","modified_gmt":"2026-02-09T02:57:21","slug":"avoiding-the-ai-arms-race-and-buying-netflix","status":"publish","type":"post","link":"https:\/\/microvibenews.com\/?p=20060","title":{"rendered":"Avoiding the AI arms race and buying Netflix"},"content":{"rendered":"<p><\/p>\n<div id=\"textFreeArticle\">\n<p><iframe loading=\"lazy\" src=\"https:\/\/iframe.iono.fm\/e\/1643653?layout=modern\" width=\"100%\" height=\"170\" frameborder=\"0\" data-mce-fragment=\"1\"><\/iframe><\/p>\n<p>You can also listen to this podcast on iono.fm here.<\/p>\n<p>Welcome to the Supernatural Stocks podcast in a week where the markets are tough and ugly for a lot of people. But here are two numbers from the past week that I want you to chew on \u2026<\/p>\n<p>First up, we have \u201cFrance 2030\u201d \u2013 the French government\u2019s initiative to attract researchers in health, climate action, AI and fundamental sciences.<\/p>\n<p>\u201cWe believe in science\u201d proclaimed [French President] Emmanuel Macron on X, with no sign of those wonderful shades from Davos that have become a meme. Frankly, the amount announced is even more worthy of being a meme.<\/p>\n<p>Listen\/read:<br \/>Investment notes from AI land<br \/>Wall Street sees AI bubble coming and is betting on what pops it<br \/>AI spending is what matters most in Alphabet, Microsoft earnings<\/p>\n<p>Just \u20ac30 million was the figure attached to a statement about how \u201cscience has found its home\u201d. Really? \u20ac30 million? I can\u2019t speak for the health initiatives, but that is quite literally a drop in the ocean in AI.<\/p>\n<p>And this is France we are talking about \u2013 the country that seems to have stepped into the lead role in Europe. Yikes.<\/p>\n<p>Here\u2019s the other number I wanted to share with you: $200 billion. Or, put differently, around \u20ac185 billion \u2013 over 6 000 times larger than the amount announced by France.<\/p>\n<p>The relevance?<\/p>\n<p>This is Amazon\u2019s planned capex for FY26. Yes, the American company will be outspending Europe\u2019s sovereign champion by 6 000 times \u2013 and in reality, it\u2019s more than that if you dig into that French number to try and isolate the AI portion, but with that kind of difference, who cares?<\/p>\n<blockquote>\n<p>We are in an arms race, folks. And I\u2019m not talking about the one that is doing wonders for European defence stocks \u2013 Rheinmetall is up 125% in the past year.<\/p>\n<\/blockquote>\n<p>I\u2019m talking about weapons of a different kind: the race to win in AI. And let\u2019s face it \u2013 over the long term, that\u2019s almost certainly the more important race.<\/p>\n<p data-start=\"609\" data-end=\"930\">Listen\/read: Capital rotations: Defence and technology<\/p>\n<p>I know the Amazon and France numbers aren\u2019t a perfect comparison, and I know there are other investment initiatives in Europe around this.<\/p>\n<p>But there are also many other companies in the US spending on cloud and AI, so the fact remains that Europe is just messing around on the fringes of this technology, no matter how cool those sunglasses are.<\/p>\n<blockquote>\n<p>America is clearly winning this race. Europe is barely even out the starting blocks, with ASML as the only major company in Europe that is winning in AI.<\/p>\n<div class=\"visible-sm-block visible-xs-block m1010\">\n<div class=\"ad-container-wrapper\">\n<p>ADVERTISEMENT<\/p>\n<p>CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n<\/blockquote>\n<p>But is this an AI arms race that investors are cheering for, or booing?<\/p>\n<p><strong>Races only have one winner<\/strong><\/p>\n<p>When you see a period of rapid change in an industry, it\u2019s usually accompanied by so much noise and disruption that investors are bleeding across the board. Normally, this happens in industries where the players are still being incubated with venture capital money.<\/p>\n<p>The cash losses happen in private, with the focus being on key revenue milestones rather than profits. Valuations reflect the risk in the journey.<\/p>\n<p>Read:<br \/>AI spend versus the real world<br \/>How South Africans are actually using artificial intelligence<\/p>\n<p>Those who are participating have sized their positions accordingly and usually built up a basket of stocks in the hope that a couple will be big winners and the rest will go to zero.<\/p>\n<blockquote>\n<p>But in this case, the AI build-out is happening in public \u2013 warts and all.<\/p>\n<\/blockquote>\n<p>Investors who bought into stories like Microsoft for its wide-moat software business are now watching their margins get diluted by the growth and investment in the Intelligent Cloud segment. This inevitably impacts valuation multiples, at least in the near-term until winners are established.<\/p>\n<p>Microsoft has survived major transitions before, but not without investors having to stomach volatility along the way. Whenever I\u2019ve talked about Microsoft, I\u2019ve noted that it would be my \u201cone stock\u201d if I was forced to pick just one.<\/p>\n<p>My view on that hasn\u2019t changed, even if their ability to thrive in the AI era is anything but a foregone conclusion. There are clearly reasons to be worried and I\u2019m not buying the current dip in the stock. I\u2019ve chosen a different sell-off to get behind, but more on that later.<\/p>\n<p>Read:<br \/>Microsoft cancels leases for AI data centers, analyst says<br \/>Microsoft\u2019s fading AI mojo keeps shares in lengthy purgatory<\/p>\n<p>If we look at Amazon and that wild capex announcement, the market sent a strong negative message with an 11% drop in the share price [during] after-hours trading. This puts Amazon at a level nearly 24% lower than the 52-week high, trading back at July 2024 levels.<\/p>\n<blockquote>\n<p>This isn\u2019t to say that the market is terrified of <em>every<\/em> AI story.<\/p>\n<\/blockquote>\n<p>Alphabet, the holding company of Google, is putting out great numbers right now in cloud growth, with the share price having decoupled dramatically from the likes of Amazon.<\/p>\n<p>I got this one completely wrong and missed out \u2026<\/p>\n<blockquote>\n<p>I didn\u2019t think that Alphabet would manage the journey from keyword searching to AI searching quite as elegantly as it has.<\/p>\n<div class=\"visible-sm-block visible-xs-block m1010\">\n<div class=\"ad-container-wrapper\">\n<p>ADVERTISEMENT:<\/p>\n<p>CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n<\/blockquote>\n<p>I\u2019m hearing an increasing number of people using Gemini rather than ChatGPT and Copilot, so Alphabet is doing well right now.<\/p>\n<p>If you draw a one-year chart of Alphabet and Amazon, you\u2019ll see that they were almost perfectly correlated from February 2025 to August 2025. Then things went a little crazy, with Amazon heading sideways and Alphabet taking a rocket to the moon.<\/p>\n<p>Before this latest after-hours drop, Amazon was down 7% over 12 months and Alphabet was up 71%. When you consider the amount of attention and equity research these stocks attract, it\u2019s incredible that you can still see moves like these.<\/p>\n<p>As mentioned earlier, the one that stings is Microsoft. It was doing incredibly well until the past few months, but the company is now down 5% over the past year.<\/p>\n<p>The market isn\u2019t enjoying Microsoft\u2019s transition from a great cloud software business with recurring income to an infrastructure play with immense capex, lumpy income and deteriorating margins.<\/p>\n<p>This situation in AI reminds me of the early days of streaming, where capex was flying out the door and it wasn\u2019t clear what the steady-state economics would look like, or who the big winner would be.<\/p>\n<blockquote>\n<p>And, incredibly, Netflix in its current form reminds me of Microsoft a couple of years ago, with a dependable business that generates cash and offers strong growth!<\/p>\n<\/blockquote>\n<p>For this reason, the dip I\u2019ve bought in the past week isn\u2019t Microsoft or Amazon. No, I\u2019ve bought Netflix, marking my entry into the stock for the first time.<\/p>\n<p>Read:<br \/>Netflix boosts bridge loan for Warner Bros deal to $42bn<br \/>Paramount extends tender offer for Warner Bros shares<\/p>\n<p><strong>An angry market creates opportunities<\/strong><\/p>\n<p>Netflix is down 20% in the past year. The stock is trading at 52-week lows and in line with important support levels from 2024.<\/p>\n<p>If it breaks lower, then it\u2019s quite likely that there\u2019s another 10% to 15% of pain to come. And if that happens, you can be sure that I\u2019ll be buying more.<\/p>\n<p>What gives me this confidence?<\/p>\n<blockquote>\n<p>Well, if you look at Netflix\u2019s business, they are in the best shape they\u2019ve ever been in.<\/p>\n<\/blockquote>\n<p>After a land grab strategy in streaming that looked a lot like what we are now seeing in AI, Netflix emerged as the best of the pure-play streamers with paid membership models.<\/p>\n<p>Sure, there are still big fish in the water in the form of Apple and Amazon, but you can\u2019t invest in those streaming businesses directly.<\/p>\n<p>Netflix\u2019s distribution means they are attracting top talent to their in-house content projects. <em>Stranger Things, Frankenstein <\/em>\u2013 you know the drill. I was very nervous of the content strategy a few years ago, but they\u2019ve proven me wrong.<\/p>\n<div class=\"visible-sm-block visible-xs-block m1010\">\n<div class=\"ad-container-wrapper\">\n<p>ADVERTISEMENT:<\/p>\n<p>CONTINUE READING BELOW<\/p>\n<\/p><\/div>\n<\/div>\n<p>There is another competitor that is worth paying serious attention to though, even if the business model has important differences.<\/p>\n<p>YouTube is going from strength to strength, with the Alphabet-owned platform doing an incredible job of turning amateur community content into a gold mine.<\/p>\n<blockquote>\n<p>At this stage, I think Netflix is lucky that Alphabet would rather spend billions on cloud infrastructure instead of content production.<\/p>\n<\/blockquote>\n<p>Having said that, the community feel of YouTube makes it a unique business, so perhaps Alphabet won\u2019t deviate from that. This would give Netflix space to build the best global streaming business that focuses on professional content.<\/p>\n<p>I would argue that they\u2019ve done that already \u2013 so why is the Netflix share price down? And why so much?<\/p>\n<p>The market doesn\u2019t like the deal to acquire Warner Bros and HBO out of Warner Bros Discovery. The equity value on that all-cash deal is around $72 billion. Netflix has shed 35% of its market cap since the deal rumours started, or over $180 billion in market cap.<\/p>\n<p>Is the deal a foregone conclusion? No, not by a long shot.<\/p>\n<p>Listen: Netflix: Warner deal adds unnecessary risk<\/p>\n<p>Although President Trump has said that he won\u2019t get involved here, Netflix is still up against Paramount Skydance, backed by the Ellison family of Oracle fame.<\/p>\n<p>Even more than that, Netflix is up against a regulatory hurdle of the highest order in the US, as this deal would give Netflix a commanding vertically integrated position in the market.<\/p>\n<p>If the deal fails, then I\u2019m betting that the share price regains much of its lost ground. It lost more than twice the value of the deal, so that seems like a relatively safe bet.<\/p>\n<p>Read:<br \/>How Netflix beat Paramount to win over Warner Bros<br \/>Warner Bros\u2019s bidders brace for a fight that will last months<br \/>DStv subscribers score as Canal+\u2019s Warner Bros Discovery bluff pays off<\/p>\n<p>If the deal goes through, I\u2019m betting that the market has overreacted and is underestimating the value to Netflix of having access to even better content. They already have incredible distribution power, so more content can only make it better in my mind.<\/p>\n<blockquote>\n<p>I don\u2019t think the volatility is over in these tech names. Not by a long shot.<\/p>\n<\/blockquote>\n<p>But if there\u2019s one thing we know from finance theory, it\u2019s that risk is what creates the opportunity for reward. I\u2019m happy to finally have Netflix in my portfolio at a price that I wouldn\u2019t describe as a bargain, but is certainly a lot more palatable than anything we\u2019ve seen recently.<\/p>\n<p><em>Follow Moneyweb\u2019s in-depth finance and business news on WhatsApp here.<\/em><\/p>\n<\/p><\/div>\n<p><script data-cfasync=\"false\">\n            !function(f,b,e,v,n,t,s)\n            {if(f.fbq)return;n=f.fbq=function(){n.callMethod?\n                n.callMethod.apply(n,arguments):n.queue.push(arguments)};\n                if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version='2.0';\n                n.queue=[];t=b.createElement(e);t.async=!0;\n                t.src=v;s=b.getElementsByTagName(e)[0];\n                s.parentNode.insertBefore(t,s)}(window, document,'script',\n                'https:\/\/connect.facebook.net\/en_US\/fbevents.js');\n            fbq('init', '779812924991616');\n            fbq('track', 'PageView');\n        <\/script>#Avoiding #arms #race #buying #Netflix<\/p>\n","protected":false},"excerpt":{"rendered":"<p>You can also listen to this po&hellip; <\/p>\n","protected":false},"author":1,"featured_media":20061,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[4296,12278,676,461,1737],"_links":{"self":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts\/20060"}],"collection":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=20060"}],"version-history":[{"count":0,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts\/20060\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/media\/20061"}],"wp:attachment":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=20060"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=20060"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=20060"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}