Restricted Stock Units, or RSUs - they are a significant part of Big Tech employees’ compensation package, outside of base salaries and bonuses. Unlike startup equity, RSUs are publicly traded equities that can appreciate in value, and be sold easily for cash.
Throughout the years I worked at Google, I’ve experienced how much these RSUs have contributed to my net worth. For many Big Tech employees, it can be hard to see a need to give up the golden goose laying their nest egg.
What Isn’t Measured Isn’t Managed
But tech stocks have been taking a beating - as they always do in bear market cycles. I manage my investment portfolio in our AI-powered app, Peek plus insights from Simply Wall Street.
Using these tools, I can see that my Google RSUs have contributed to most of the volatility in my net worth.
Google is down 8% this last month. Given my current allocation into Google of six figures (from my RSUs), the decrease in Google had a five-figure impact on my total portfolio value.
Now, Google is still up 9%, year-to-date. And by most valuation benchmarks, it remains fairly valued in terms of its earnings.
However, we must consider an individual asset’s performance relative to its peers. GOOGL actually underperformed the US Market which returned 19.1% over the past year!
That means that while GOOGL isn’t a bad hold, I could have done far better had I reallocated out of it earlier. Or it could be a good time to buy into the stock if you aren’t already allocated because it was far more expensive before.
Buy, Sell, or Hold?
Many Big Tech companies I talk to often say they don’t know how to reallocate their portfolio, even if they knew it was costing them more money to keep their RSUs.
A simple way of deciding what to do with your RSUs, is to evaluate the investment thesis for the future value of the company.
Is this going to be a long-term hold?
The biggest risk to Google right now can be summed up in two letters: A.I.
Google is like a free public library that makes money by charging companies to put up advertisements scattered throughout the shelves and the pages.
But Google’s Search business is decreasing, as more people turn to AI-based platforms like ChatGPT for answers, instead of trawling through search engines like Google.
It’s the equivalent of asking an expert, instead of going to the librarian to recommend and browse relevant books on the topics yourself.
This is bad news considering that Google’s search business is 80% of its revenues.
With the rise of AI-driven search models like ChatGPT and Bing with OpenAI, there's been a noticeable shift in search behavior. More users are relying on AI-generated responses or alternative platforms for quick information, which poses a long-term threat to Google’s traditional search ad dominance.
Google isn’t lying flat. It’s making a huge push into AI with Gemini, and integrating it into its vast product suite like Google Docs and Gmail.
But it still lags the rest of better-known names in the space.
Privacy and Regulatory Changes
Changes in privacy laws, especially in Europe and California, along with the phasing out of third-party cookies, create further risks to Google's ability to target ads effectively, reducing ad spend efficiency and revenue potential.
In the past, the Google library could install smart cameras and wearables at the entry to track how visitors moved through its shelves, what books they read, etc. But new privacy laws have made that increasingly harder.
That means advertisers are willing to spend less because Google’s ability to provide more targeted ads declines.
How to evaluate Google as a stock?
Google isn’t going anywhere anytime soon. But it might just be a mature, profitable and healthy company with slower growth rates, but high dividend payouts.
What am I going to do about this stock?
Given that I’m in my higher-risk, higher return stage in my career, I will have to keep selling out of my RSUs.
I’ve already done two rounds of selling off of Google in the last year, amounting to over six figures of capital that I’ve reallocated into better-performing opportunities elsewhere.
All of these insights would not have been possible without Peek. If you’d also like to use AI to understand how you can invest your portfolio better, visit: https://peek.money/ to learn more!