Alphabet’s (GOOGL - Free Report) division Google is leaving no stone unturned to bolster presence in the cloud market of Latin America (“LATAM”) driven by its expanding data centers and improving artificial intelligence (AI) as well as machine learning (ML) skills.
The company has announced plans to invest $140 million in its Chilean data center located in Quilicura, Santiago. Notably, the recent plan is in addition to the company’s initial investment of $150 million.
The latest move of Google will expand the storage capabilities and size of the data center. This is likely to add efficiency to its cloud services.
Consequently, this will aid the company in attracting customers to its cloud platform. Further, the company’s recent investment will help it rapidly penetrate the global data center storage market, which as per a report from Research and Markets is expected to witness a CAGR of 11.83% during the 2018-2022 period.
Coming to the price performance, shares of Alphabet have returned 12.2% on a year-to-date basis against the industry’s decline of 9.1%.
Prospects of Cloud Service in LATAM
According to data from Frost & Sullivan, the cloud services market in LATAM is expected to reach $7.4 billion by 2022 from $1.8 billion in 2017 at a CAGR of 31.9%.
Google’s continued focus toward strengthening footprint in Latin America will help it in gaining traction in this rapidly growing market.
Further, Chile which accounted for 7.9% of the abovementioned LATAM’s total figure in 2017 holds great potential for growth in the long haul. This can be attributed to the favorable environment for technical innovation, growing usage of internet, strengthening infrastructure for digitization and business friendly regulations present in the country.
Moreover, the tech giant intends to benefit the society by expanding the size of its Chilean data center. Per Reuters, the company aims to create 120 new permanent jobs and more than 1,000 new jobs in the construction process.
Additionally, the company aims to help the businesses and organizations in Chile to access data and other key tools in a much faster way.
All these social benefits are likely to boost the adoption rate of Google’s cloud services which in turn will aid its top-line growth.
Strengthening Competitive Position
We believe the abovementioned endeavors will provide Google a competitive edge against Amazon (AMZN - Free Report) and Microsoft (MSFT - Free Report) which are also putting strong efforts to gain momentum in Latin American cloud space.
Amazon Web Services has offices in Brazil, Chile, Colombia, Argentina and Mexico. Currently, the company is aggressively expanding in the region by setting up new data centers, particularly in Chile and Argentina.
Further, the company is in talks with the president of Chile to reach into space by storing and mining astrodata from Chile’s giant telescopes.
Microsoft Azure also provides cloud facilities to Latin America through its data center in Brazil. It also has an availability zone in the Brazil.
Nevertheless, Google Cloud has three availability zones in the LATAM region with Sao Paulo, Brazil being the newest one. Additionally, the company is a member of Chile’s Large Synoptic Survey Telescope (“LSST”), which will be fully operational in Cerro Pachon in 2022.
Consequently, these strong efforts will continue to aid Google’s market position in Latin America.
Zacks Rank & Stock to Consider
Currently, Alphabet carries a Zacks Rank #3 (Hold).
A better-ranked stock that can be considered in the broader technology sector is Match Group (MTCH - Free Report) carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth for Match Group is currently pegged at 12.5%.
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