The Google stock price (now Alphabet) surges after a positive court decision in the U.S. removes antitrust-related concerns. The price targets are increased when analysts think that AI advances in TPUs, DeepMind, and Gemini will improve long-term projections.
- Positive Antitrust Decree–Big Stock-market Stimulus.
- A federal judge in the United States ruled that Alphabet must not sell its Chrome browser or Android OS, a possible relief against the threat of breaking up. Rather, the court came up with weaker limitations like prohibition of exclusive contracts and data access to competitors.
- Consequently, Alphabet stock surged 6 percent in pre-market trade, and after-hours trading rose by as much as 7 percent, according to some sources.
- Analyst Upgrades & Positive Expectations.
- KeyBanc Capital Markets increased its target price on GOOGL to $265 (from 230), and it has an Overweight rating, arguing that the decision was better than expected and that a major overhang on the stock was removed.
- According to TipRanks, Evercore ISI analyst Mark Mahaney repeated a Buy rating and a price target of $240. In the meantime, Morgan Stanley was holding a Buy and a Price target of 210, suggesting that it still believed in Alphabet after the ruling.
- Long-Term Growth Possibility through AI Hardware.
- D.A.Davidson analysts singled out Alphabet AI hardware (and, specifically, its Tensor Processing Units (TPUs) and DeepMind research) as one of the high-value spinoffs. They estimate the opportunity to be up to 900 billion, but at the time they have a more neutral rating, and their price target is at 190.
judicial decision, commentary, and Alphabet AI/machine learning roadmap:
- The Court Decision: Alphabet Escapes By a Hair.
- A federal judge in the United States made a landmark ruling in the decades-old DOJ antitrust lawsuits against Google.
- Lesson learned: It does not mean Alphabet has to sell Chrome or Android, which was the greatest Wall Street fear.
- Rather, the judge has applied behavioral remedies which include:
o Prohibiting monopolistic contracts that provide Google with an unjust advantage in search/pre-installed apps.
o Forcing the exchange of data with competitors to avoid information walled gardens.
o Increased compliance supervision, which requires reporting to the regulators periodically.
Impact: This will be a best-case bad outcome, meaning that Alphabet will be constrained but not broken up. This cast a giant shadow over the stock.
- Deeper Analyst Commentary
- KeyBanc Capital Markets: Increased target to $265 (previously 230). Analyst Youssef Squali said the decision was milder than it could have been, and the company can change compliance rules without significant revenue blows.
- Evercore ISI (Mark Mahaney): Buy/Maintains PT $240. Feels the decision removes the risk of a breakup of the multiple as investors no longer have to price in the possibility of a breakup.
- Morgan Stanley: Reinstated Buy, PT of $210. Their opinion: search advertising can face some minor head-winds created by forced competition, but the diversification of revenue (YouTube, Cloud, AI services) cushions the risk at Alphabet.
- D.A. Davidson: No position, PT $190. Without being overrated as an asset, stated the AI hardware potential (TPUs, DeepMind), but stated the regulatory risk as a long-term one.
- Barron and FT analysts: framed the decision as a slap on the wrist that nevertheless leaves Alphabet hegemonic in core search/ads.
Consent: Analysts are turning bullish, as they believe that the ruling eliminates a worst-case scenario, but leaves the growth engines of Alphabet intact.
- AI, Machine Learning Trajectory at Alphabet.
Alphabet is no longer a search/ads company, but it is quickly becoming an AI-first organization.
- As stated earlier, these are TPU (Tensor Processing Units):
o AI chips owned by Alphabet and being deployed in Google Cloud and by third parties.
o Analysts think that TPU hardware/software may upset the dominance of Nvidia GPUs, particularly with businesses having options when there is a shortage of GPUs.
o D.A. Davidson is worth it at up to $900 billion upon spin out or an aggressive scale-up.
- DeepMind & Gemini AI:
o The work of DeepMind still leads in the field of reinforcement learning, protein folding, and large language models.
o Multimodal model suite Gemini AI of Alphabet is being incorporated in Search, YouTube and Workspace (Docs, Gmail, Sheets).
o The company is driving AI as a service through Google Cloud, so this acts as a direct rival to Microsoft and its Azure OpenAI integration.
- Consumer AI Push:
o AI capabilities such as on-device translation, voice assistance, real-time transcription, and AI-generated image editing are being embedded in pixel devices and Android.
o Analysts view this as a method of drawing users into more of the Google ecosystem.
- Monetization Strategy:
o AI-generated summaries (Search Generative Experience, SGE) could short-term reduce clicks on ads, however, Google intends to place ads directly in the responses of AI.
o Cloud AI APIs represent a rapidly expanding source of revenue, and enterprise usage in healthcare, finance, and logistics is increasing.
Prognosis: Analysts believe that AI is the next trillion-dollar revenue driver at Alphabet its success will depend on the speed at which it can commercialize TPUs and offset AI-driven search with ad protection.
Bottom Line:
- The court decision saved Alphabet the structural breakup.
- Price targets are being upgraded and analysts are finding greater upside.
- The AI/ML trajectory of Alphabet, in particular TPUs, DeepMind, and Gemini, is becoming viewed as a parallel growth engine, potentially competing with AI dominance of Nvidia and offsetting risks to search regulation.
Also read- Nvidia stock