Google's Notebook LLM
An AI-first notebook
In a potentially exciting AI innovation, Google have released with a software called Notebook LLM which they describe as “an AI-first notebook, grounded in your own documents designed to help you gain insights faster.”
You can see it here.
Notebook LLM can be used to analyse any document.
I used in a PDF of my recent note on Infosys, the NYSE listed India-based IT Services company.
Notebook LLM offers to provide a number of of “products” including
1. A quick summary of the document
2. A Briefing Document
3. A set of questions raised by the document
4. A critique with suggestions how to improve the document.
I selected Briefing Document.
The output produced by Notebook LLM is given below. I am very impressed – this seems to be an amazing technology which help all knowledge workers, academics etc who deal with written documents
Briefing Doc: Infosys Inc. (INFY) - An Overview and Analysis
Source: Infosys.pdf
Date: 2023-10-27
Main Theme: This document provides a comprehensive overview of Infosys Inc. (INFY), a leading Indian ITES company. It delves into the company’s history, business model, financial performance, opportunities, and challenges, ultimately providing a valuation analysis and investment thesis.
Most Important Ideas/Facts:
1. Industry Background:
The Indian ITES sector emerged as a globally competitive force in the 1990s, leveraging "global labor arbitrage" by providing software services at lower costs.
Infosys and TCS are the top two players in this sector, with significant revenue streams from US companies.
The sector faces headwinds due to economic uncertainty, reduced discretionary spending, and the rise of AI.
2. Infosys Overview:
Established in 1981, Infosys has grown into a $93 billion company with 317k employees and 1882 clients.
It derives 60% of its revenue from North America and focuses on digital services and consulting, powered by AI and cloud technologies.
Infosys boasts a strong balance sheet, high cash generation, and a policy of returning 85% of free cash flow to shareholders.
3. Business Model and Challenges:
Infosys operates on a high-volume, low-margin business model with low operating leverage.
Key challenges include:
Recruiting and retaining skilled IT professionals.
Increasing revenue per client.
Adapting to the evolving technology landscape (AI and automation).
4. Opportunities and Threats:
Opportunities:The AI revolution presents significant potential for companies like Infosys to help organizations re-engineer their operations.
Chairman's statement highlights this: "The puck is clearly and quickly moving to a place where the balance of advantage will be with Infosys."
Threats:AI could also displace demand for Infosys' services.
Increasing wages in India and potential unemployment in the US/EMEA could reduce labor cost arbitrage opportunities.
Intense competition from global and Indian players.
5. Financial Performance and Valuation:
Revenue growth has slowed in recent years, with analysts expecting a moderate pickup in the coming years.
Margins are high but declining.
Infosys has a strong track record of free cash flow generation.
Valuation analysis suggests:
P/E ratio of 26x is in line with Accenture but higher than Cognizant (which has lower profitability).
DCF analysis suggests a potential 19% discount to the current share price.
6. Conclusion:
Infosys is a financially sound company with a strong market position, but faces growth challenges.
The investment thesis hinges on the company's ability to capitalize on the AI revolution while mitigating potential threats.
The author remains cautious and would consider investing if the share price falls below $17.50.
Quotes:
On the AI revolution: "Above all, the gen AI revolution presents an unrivalled opportunity. The flux of change as the whole technological landscape is being reset will create many large openings."
Overall Impression:
The document provides a balanced and insightful analysis of Infosys. It highlights both the company's strengths and weaknesses, while acknowledging the uncertainties and opportunities presented by the rapidly changing technology landscape. The author's cautious stance seems justified, given the company's mature stage and the competitive pressures it faces.