Who'll Conquer AI Search? Bullish Alphabet Analyst Praises Google Gemini While It Faces Lawsuit Ruling Fallout

Alphabet Inc‘s GOOG GOOGL Google is by far the largest search engine in the world, though a recent court ruling could threaten its dominance.

An analyst is still encouraged by Google’s market position given its foray into AI and lead over rival OpenAI’s ChatGPT.

The Alphabet Analyst: In a note published Tuesday, Bank of America analyst Justin Post reiterated a Buy rating for Alphabet with a price target of $206.

Main Takeaways: Post stated the following as rationale for his Buy rating.

“We see Alphabet as well-positioned long term with leading AI technology to apply to search, YouTube and Cloud businesses. Alphabet should also benefit from increasing mobile usage, video usage, Google Play activity, and connected device activity (including autos),” he wrote.

The analyst noted that despite OpenAI’s clear intent to take a chunk of search market share, it has not come close to Google.

ChatGPT had 82 million queries in July to Google’s 2.7 billion.

Post also believes Google’s Gemini provides clear monetization benefits: “We remain positive on the growing Gemini integration across the Google ecosystem and think broader rollout of AI overviews will likely help drive higher usage and incremental ad spend on the platform in 2024. Moreover, with a strong focus on expenses, we think y/y margin growth in 2H will be a bright spot and potential EPS upside driver.”

Monday’s ruling in a federal court that Google operates a monopoly derailed optimism among some analysts, Post is more optimistic. He believes that Google’s existing competitive moat will help it weather the storm.

“Although DoJ [Department of Justice] trial concerns and impact from broader launch of OpenAI’s SearchGPT are overhangs on the stock, we believe Alphabet has data, technology, distribution and financial advantages that will likely help mitigate new competitive threats,” Post said.

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Photo: Courtesy Google