The recent surge in Alphabet’s stock represents a significant turning point in the technology landscape. *The analyst highlights unwavering support from Wall Street banks for Alphabet.* This turnaround occurred following a 7% drop in stock prices, triggered by Apple’s intentions to develop AI search capabilities for its Safari browser. *Apple’s report on its research has raised concerns about Alphabet’s future.* The resistance from financial experts confirms Alphabet’s strength in the face of this competitive prestige. *The dynamics of Google’s users and revenues continue to evolve.*
Recovery of Alphabet’s stock
Alphabet’s stock saw an increase of about 1.4% Thursday morning after a significant drop of 7% on Wednesday. This decline was largely attributed to a report indicating that Apple was considering integrating AI search options into its Safari browser. Google, a subsidiary of Alphabet, remains the default search engine for Safari, paying Apple a substantial amount of $20 billion each year.
Apple’s statements and market impact
During his testimony in the U.S. Justice Department’s trial against Alphabet, Eddie Cue, Senior Vice President of Services at Apple, revealed that Google searches on Safari had declined for the first time last month. Cue noted that this drop resulted from increasing user appeal towards AI-based search engines. He also mentioned that Apple is “actively exploring” the addition of AI-based search engines, such as Perplexity, as default options for Safari. This realization has raised concerns regarding the future of Google’s market dominance in search engines.
Support from Wall Street analysts
Despite these concerns, several Wall Street banks, including Jefferies, TD Cowen, Citi, and JPMorgan, have maintained their buy or overweight recommendations on Alphabet’s stock. Analysts judged that the market’s reaction to Cue’s comments was overblown. Brent Thill from Jefferies and Harlan Sur from JPMorgan highlighted that these concerns could bolster Alphabet’s position in the lawsuit against anti-competitive accusations.
Analysis of the implications for Google
Analysts suggest that Apple might have an interest in portraying Google in a less favorable light in the search market. Thill explained that, given the substantial payment from Alphabet to Apple as the default search engine, it would make sense for Apple to highlight data that benefits Google’s defense. Cue noted that Google continues to offer the best financial conditions, thus strengthening their position. The argument that Google is not anti-competitive could benefit its appeal against ongoing accusations.
Performance of AI-powered searches
John Blackledge from TD Cowen indicated that Google’s AI insights, incorporating the AI Gemini model, already attract 1.5 billion monthly users across 140 countries. Currently, these AI-powered searches generate revenue equivalent to that of traditional searches, supporting the notion that AI search engines do not cannibalize Google’s core advertising model.
Concerns regarding competition in the sector
The fear that AI models will replace traditional search engines, a domain dominated by Google, has intensified since the launch of ChatGPT by OpenAI in 2022. Major tech companies are racing to catch up by launching AI-enhanced search tools. This competitive context drives analysis and vigilance concerning market evolution and the actions of large tech companies.
Frequently asked questions about the recovery of Alphabet’s stock and reactions from Wall Street analysts
Why did Alphabet’s stock drop by 7% recently?
The drop of 7% in Alphabet’s stock occurred after a report indicated that Apple was considering adding AI search options to its Safari browser, which currently uses Google as its default search engine.
What are the reasons Wall Street analysts continue to support Alphabet?
Wall Street analysts, including those from Jefferies, TD Cowen, Citi, and JPMorgan, maintain “Buy” or “Overweight” ratings on the stock, emphasizing that the reaction to Apple’s statement about the decline of searches on Safari was excessive.
What impacts could Apple’s plan to integrate AI search engines have on Google?
Apple’s plan could heighten competition in the search engine sector. However, Google continues to experience overall growth in queries and monetization of its services, even with the emergence of AI search solutions.
How do the statements from Apple’s Vice President result in changes in market shares?
Statements from Apple’s Vice President of Services, Eddie Cue, regarding the decline of searches on Safari aim to highlight market competitiveness, which could potentially influence business relations between Apple and Google.
What are the main arguments from analysts defending Alphabet following recent developments?
Analysts point out that AI searches will not cannibalize Google’s traditional advertising model, as these new tools still attract significant revenue, thereby supporting Google’s position against growing competition.
How does Google’s AI Gemini model impact its search business?
The AI Gemini model, which summarizes search results, attracts 1.5 billion monthly users and generates revenues comparable to those of traditional searches, allowing Google to strengthen its market position.
What is the financial agreement amount between Google and Apple for the default search?
Google currently pays about $20 billion per year to Apple to be the default search engine for the Safari browser, highlighting the importance of this relationship for both companies.
How are investors reacting to the AI integration by other companies like Apple?
Some investors express concern about the ability of AI models to replace traditional search engines; however, analysts argue that Google’s current dominance in this sector remains strong.
