Intel stock extends gains after report of possible U.S. government stake
Wednesday, Alphabet Inc’s (NASDAQ:GOOGL) shares fell following comments made by Apple (NASDAQ:AAPL)’s SVP of Services Eddy Cue during the Department of Justice’s antitrust lawsuit remedies hearing against Google’s Search business. Despite the market reaction, InvestingPro data shows Google maintains excellent financial health with a "GREAT" overall score and robust revenue growth of ~13% over the last twelve months. Stifel analysts reiterated their Buy rating and $200.00 price target on Alphabet stock despite the potential negative impact highlighted in the testimony.
In the testimony, Cue suggested that advancements in artificial intelligence (AI) could have a more immediate-term impact on Google and traditional search dynamics. Stifel analysts had previously assessed the potential market share loss for Google within the Apple ecosystem after the initial ruling in August, estimating a 10-30 percentage point loss at Apple, where Google currently holds about a 96% market share. This estimation was based on the assumption of a lower Traffic Acquisition Cost (TAC) rate compared to the roughly $20 billion that Google pays Apple annually to remain the default search option on Safari. According to InvestingPro, Google’s strong balance sheet and cash flows suggest it’s well-positioned to handle potential changes in its business model, with current assets significantly exceeding short-term obligations.
Despite the concerns raised, Stifel analysts see the ongoing relationship between Apple and Google, with Cue still considering Google as the best financial option for default search, as a mitigating factor. Additionally, they believe that Google’s Gemini chatbot could be a long-term winner, benefiting from Google’s extensive experience in answering user queries.
The analysts are closely monitoring the trial and plan to continue updating their perspectives as more information becomes available. They highlighted that while the potential share loss to AI chatbots might be factored into current estimates, Google’s strengths and strategic relationships could serve as partial hedges against these losses. This sentiment echoes their previous analysis on the subject of Agentic AI, where they discussed the potential for AI to reshape the search industry landscape.
In other recent news, Alphabet, the parent company of Google, reported first-quarter results that exceeded expectations, driven by the success of its search advertising business. Analysts, including Citigroup (NYSE:C)’s Ronald Josey, noted the promising performance in search and cloud services, which could positively influence other tech companies like Meta and Amazon (NASDAQ:AMZN). Meanwhile, Google’s autonomous driving unit, Waymo, plans to expand its fleet by adding 2,000 new robotaxis by 2026, with a new manufacturing facility in Metro Phoenix contributing to this growth. This facility represents a multi-million dollar investment and is expected to create hundreds of jobs in Arizona.
In the realm of artificial intelligence, Google’s position faces challenges as competitors like OpenAI and Grok gain traction, according to Gene Munster of Deepwater Management. Munster highlighted the need for Google to adapt its monetization model and address competition in the search market. Additionally, JMP Securities analyst Andrew Boone maintained a Market Perform rating for Alphabet, citing risks from emerging AI technologies and potential regulatory challenges. Despite these concerns, Alphabet’s recent earnings report has positively impacted the tech sector, with stocks like Meta and Amazon experiencing gains.
In contrast, a former Meta executive expressed optimism for Meta’s continued growth, attributing it to Facebook (NASDAQ:META)’s extensive user data and adaptability in advertising strategies. These developments highlight the dynamic landscape of technology companies navigating the challenges and opportunities presented by AI and market competition.
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