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Top Analyst Weighs In on Alphabet Stock Amid Gen AI Competition

Top Analyst Weighs In on Alphabet Stock Amid Gen AI Competition

  • 17.03.2025 19:48
  • markets.businessinsider.com
  • Keywords: danger, success

Alphabet's search dominance remains strong despite slight market share declines. Mark Mahaney notes increasing Gen AI usage but highlights Google's continued leadership in commercial categories, backing his positive stock rating.

Alphabet ReportsGOOGLsentiment_dissatisfied

Estimated market influence

Alphabet

Alphabet

Negativesentiment_dissatisfied
Analyst rating: Buy

Investors are concerned about Alphabet's search dominance due to Gen AI competition.

Evercore

Positivesentiment_satisfied
Analyst rating: N/A

Conducted a survey on U.S. search engine usage, showing Google's leadership despite slight market share decrease.

DuckDuckGo

Neutralsentiment_neutral
Analyst rating: N/A

Maintained consistent usage between 3% to 6%.

Bing

Neutralsentiment_neutral
Analyst rating: N/A

Maintained consistent usage between 3% to 6%.

Yahoo!

Neutralsentiment_neutral
Analyst rating: N/A

Maintained consistent usage between 3% to 6%.

ChatGPT

Positivesentiment_satisfied
Analyst rating: N/A

Usage increased from 1% to 5%, with gains in younger age groups.

Google

Positivesentiment_satisfied
Analyst rating: N/A

Maintained strong dominance in commercial search categories and slight decrease in general search share, but still leading.

Context

Analysis of Alphabet Stock Amidst Generative AI Competition

Overview

  • Context: Alphabet (Google) faces growing competition in the search engine market due to generative AI tools like ChatGPT. However, it retains significant leadership in key commercial categories.

Key Findings

Market Trends

  • Search Engine Usage:

    • Google maintains clear and consistent leadership, with its primary search engine share at 78% (down slightly from 80% in June 2024).
    • ChatGPT usage increased to 5% before dropping to 4%, with highest adoption among younger users: 8% for 18-29-year-olds and 6% for 30-44-year-olds.

  • Commercial Search Dominance:

    • Google's lead in commercial categories like Shopping and Travel remains strong. For example, its share increased for "Buy a Product" (from 29% to 31%) and "Find Ideas for Vacation" (from 49% to 52%).

  • Generative AI Impact:

    • 60% of respondents have tried Gen AI tools, up from 40% in June 2024.
    • Among Google's Gen AI users, 59% find results more effective and 59% report being "Extremely/Very satisfied" with the experience.

Competitive Landscape

  • Competitor Performance:

    • DuckDuckGo, Bing, and Yahoo! have consistent usage rates of 3%-6%, unchanged since June 2024.

  • Investment Outlook:

    • Analyst Mark Mahaney rates Alphabet stock as Outperform (Buy) with a $205 price target, suggesting a 26% return in a year.
    • The consensus rating is Moderate Buy, with an average target of $215.88, implying a 32.5% increase.

Strategic Considerations

  • Gen AI Integration: Alphabet's integration of Gen AI tools like Gemini appears to enhance user satisfaction and search effectiveness, countering competition.
  • Market Positioning: Google's dominance in commercial search suggests that any market share loss is likely limited to general information queries.

Long-term Effects

  • The generative AI trend may reshape consumer behavior but Google's ability to adapt and improve its tools could solidify its position over the long term.

Regulatory Impacts

  • No significant regulatory impacts are mentioned, but ongoing antitrust scrutiny remains a potential risk for Alphabet.

Financial Implications

  • Stock Performance: Alphabet closed at $236.11 on March 17, 2025.
  • Analyst Sentiment: Positive outlook with a moderate buy consensus and significant upside potential.

This analysis highlights Alphabet's resilience in the face of generative AI competition, driven by its strong commercial search dominance and effective integration of Gen AI tools. The positive analyst sentiment underscores the company's long-term growth prospects.