- Google’s parent company Alphabet (GOOGL) is in the spotlight as it navigates the opportunities and risks presented by generative artificial intelligence (AI).
- One key question is how the integration of chatbot AI technology into search queries will affect the company’s advertising revenue.
- Google’s stock has advanced 19% in 2024, and the company recently announced its first-ever dividend and a new $70 billion stock buyback.
Explore how Google is leveraging generative AI, the potential impact on its stock, and the company’s strategic moves in the tech industry.
Google Stock: Possible Catalysts
Google is expected to make AI-related announcements at its upcoming Google I/O and Google Marketing Live events. The company’s first-quarter earnings and revenue surpassed consensus estimates, and it announced a new $70 billion stock buyback. Despite increasing capital spending on AI investments, Google expects its operating margins to expand in 2024.
Generative AI Momentum?
Analysts note that Alphabet has realigned its strategic direction on AI, with a clearer pathway to monetization and cost optimization. Google’s cloud business, bolstered by AI offerings, saw a 28% increase in Q1. The company’s consolidation of various AI teams under Google DeepMind is expected to streamline operations and enhance product development efficacy.
DOJ Anti-Trust Case Ruling Looms
A ruling in the Justice Department’s antitrust trial against Google is pending. The government alleges that Google maintains an internet search monopoly through exclusionary distribution agreements. If Google loses, it could face a breakup or changes to its search engine promotion methods.
‘Other Bets’ Under New Scrutiny
Alphabet’s money-losing “Other Bets” and Moonshots are company assets that investors should monitor for new developments. Google’s Other Bets reported an operating loss of $4.1 billion last year on revenue of $1.5 billion. Alphabet is allowing Other Bets like Google Fiber to seek outside investors, potentially leading to spin-offs.
Google Stock: YouTube Growing Fast
Google aims to counter Microsoft’s investment in artificial-intelligence startup OpenAI by making its own generative AI tools available to software developers. Google’s cloud-computing unit claims to be working with 70% of generative AI startups. YouTube TV has more than 8 million paying subscribers, making Google TV the fourth biggest provider of internet TV services.
Boosting Ad Business Through E-Commerce
Alphabet aims to boost its advertising business through e-commerce-related internet search, hoping to chip away at Amazon.com’s dominance in product search. Google’s internet search business is expected to hold up better than other advertising formats, such as social media.
GOOGL Stock Fundamentals
In Q1, Google earnings came in at $1.89 per share, up 61% from a year earlier. Gross revenue rose 15% to $80.54 billion. Advertising revenue rose 13% to $61.66 billion, and YouTube ad revenue rose 21% to $8.1 billion. Google’s capital spending jumped 91% to $12 billion.
Google Stock: Cloud, Hardware, Security Acquisitions
Google’s hardware business is battling Apple in smartphones and Amazon in smart-home appliances. Google’s cloud-computing business faces tough rivals in Amazon and Microsoft. Google acquired cybersecurity firm Mandiant for $23 per share in an all-cash $5.4 billion deal.
GOOGL Stock: Is It A Buy Or Sell Now?
Despite mounting competition in AI and internet search, Google stock advanced 58% in 2023. That was better than the 43% jump in the Nasdaq composite. The S&P 500 rose 24%. Google’s Relative Strength Rating currently stands at 90 out of a best-possible 99. Google stock holds an Accumulation/Distribution Rating of D-plus.
Conclusion
Google’s strategic moves in AI and its financial performance make it a stock to watch. Despite challenges such as the pending DOJ antitrust case, the company’s advancements in AI, cloud computing, and advertising present potential growth opportunities. Investors should monitor these developments closely.
