Alphabet has a cash problem.

Alphabet has roughly $113.76 billion in cash and $109.12 billion in total liabilities. The company is worth $365.26 billion, so it could pay off all its liabilities and still be worth over $246 billion.

That’s pretty insane.

The majority of big tech – Apple, Meta, Amazon, Microsoft, Nvidia, etc. have more liabilities than cash. That’s normal. That money is actively in use. A quality company uses its cash to build long-term value. When companies use debt and leverage it responsibly, they can provide more cash in the future for things like a dividend, share buybacks, or continuous reinvestments in the business.

Although this is not the worst thing in the world for Alphabet, it is a problem. The leadership at Alphabet needs to be more efficiently aggressive instead of calmly inactive.

Sitting on a ton of cash only works during a recession, and recessions don’t last forever. Other competitors are making bold moves, and although many will fail, those that succeed will be able to take away meaningful market share from Alpahabet’s core business if they remain stagnant.

Alphabets hoarding strategy reminds me of a talented doctor with a high income and a ton of savings but little investments. If that hefty salary keeps coming in, it works, but many doctors have impressive wages but so-so-accumulated wealth. A doctor with a high salary who produces just average investing results should have easily $10-20 million by the time they retire. The net worth of the average doctor is only around $1-5 million.

A doctor’s annual income tends to be 3-4 times the yearly income of the average American household, so a net worth of $1-5 million is just…. “meh.” Compare that with a teacher or plumber with a $1-5 million net worth.

Alphabet needs to be more active instead of just sitting on the revenue produced from its core businesses. Google Search is a continuous revenue stream, but any disruption could seriously cause a dent in the empire.

My message to Alphabet’s CEO Sundar Pichai: Stop with this scarcity mindset and beef up investments in the Other Bets division. The good news for Alphabet shareholders is that having a lot of cash is a problem but an easily fixable problem. It is not an existential crisis, at least not yet. I see this as a small roof leak requiring a patch-up. Alphabet still has a lot of data and a one-stop-shop digital ecosystem. Parking your money in Alphabet stock is safe, with a moderate amount of upside.

Pichai’s seat should be getting warmer. Alphabet needs to go on offense now. If not, their board of directors should strongly consider replacing Pichai with a more action-oriented war-time CEO. Alphabet has the soldiers, ammunition, and resources to win the AI race, but do they have the right leadership? Time will tell.