Google Stock on the Rebound: The AI Rivalry and Antitrust Proceedings
Analysts Maintain Positive Outlook on Google Despite Fears Over Search Operations Triggering Sell-off
In a unexpected twist, Morgan Stanley is advocating for buying Alphabet (GOOGL) stock following a significant drop on Wednesday, fueled by concerns about Apple developing AI-powered search options for Safari that could potentially displace Google.
The slide in market capitalization, amounting to approximately $150 billion, was driven by apprehensions surrounding Google's potential loss of market share. Nevertheless, several analysts remain optimistic, citing Google's strides in AI technology and its leadership position in the search industry.
"GOOGL sentiment has taken another dip due to AI-disruption fears, triggered by Apple's exploration of AI-powered search options for Safari," Morgan Stanley stated, referring to comments from an Apple executive hinting at potential integration. However, Morgan Stanley regarded competitors like OpenAI, Meta (META), and Perplexity as yet lacking the necessary user bases and compelling products to lure customers away from Google.
As of Thursday, shares of Alphabet were up 2% at around $155, recovering from a 7% decline the previous day. Morgan Stanley maintained its price target of $185, asserting that it was a favorable time to invest in the stock.
Jefferies analysts noted Chrome's impressive 66% browser share, compared to Safari's 17%, and Google's recent advancements in AI, such as the reach of AI Overviews in Search to 1.5 billion monthly active users. "While we acknowledge the emergence of alternatives to Google Search, GOOGL is not standing still," Jefferies stated, adding that today's sell-off may have been overzealous. Jefferies reaffirmed its $200 target.
Despite this optimistic outlook, the antitrust proceedings against Google loom large. Last August, a federal court ruled that Google unlawfully maintained a monopoly in online search [2]. The case is now in the remedies phase, with potential solutions including structural breakups, termination of default search agreements, or mandatory licensing of search data to competitors [2].
The outcome of this case could have profound implications for Google's search dominance. Increased competition, regulatory precedent, and a deterrent effect on Google's bargaining power are all potential outcomes. A final ruling is expected by mid-2025, and it has the potential to reshape the digital competition landscape globally [2].
Sources:1. Barron's2. Reuters
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- Morgan Stanley suggested buying Alphabet (GOOGL) stock, despite a dip in its market cap due to AI-disruption fears from Apple's exploration of AI-powered search options for Safari.
- Google's leadership position in the search industry and strides in AI technology, such as the reach of AI Overviews in Search to 1.5 billion monthly active users, make analysts optimistic about its future, contrary to apprehensions about Google's potential loss of market share.
- Competitors like OpenAI, Meta (META), and Perplexity are seen as lagging behind Google in terms of user bases and compelling products, making it less likely for customers to leave Google for these alternatives.
- Chrome's 66% browser share, compared to Safari's 17%, adds to Google's strong position in the technology and finance-related business arenas.
- Antitrust proceedings against Google for maintaining a monopoly in online search could lead to profound implications for Google's search dominance, with potential solutions including structural breakups or mandatory licensing of search data to competitors.
- A final ruling in the antitrust case against Google, expected by mid-2025, has the potential to reshape the digital competition landscape globally.
