Alphabet’s raid into AI-based search is nothing less than revolutionary, but Cantor Fitzgerald’s Neutral rating points towards a clash between hype and hard facts. Sure, Google Search does indeed now seem smarter, more conversational, and more intuitive, but investors must question whether this AI revolution will ultimately lead to more robust revenue streams or merely more expenses.
AI will have users involved for longer, but making money from interactions like that is a whole different problem, particularly when ad formats and consumer patterns aren’t quickly evolving to fit the new AI-powered search experience.
Alphabet is demonstrating that it can develop AI more rapidly than any other competitor, with AI Overviews now responsible for over half of all search queries, which is a tremendous surge in under a year. This illustrates Google’s supremacy in controlling how billions engage with information. However, the stock is already close to its all-time highs, trading in technically its “overbought” levels.
That implies that purchasing today is risky, because even robust AI expansion may already be factored in. On the other hand, competitors such as Meta are demonstrating that AI-fueled engagement can make enormous advertising payoffs, and Microsoft’s Bing is persistently trying out OpenAI integrations. Google will have to demonstrate that its AI-first approach in terms of search does more than just defend the market share, that it can also increase profits over the long term.
Also, Google’s dominance in AI could attract additional regulatory attention, particularly as it increases agreements with governments and integrates Gemini AI into products. This will raise concerns about privacy and market power.
Alphabet’s AI initiative is undoubtedly noteworthy, but investors need to balance everything and keep its enthusiasm in check as well. As long as the stock is already worth $2.5 trillion, the next phase of growth will hinge less on breathtaking AI demonstrations and more on solid evidence of sustainable monetization.
In the near term, Google’s AI supremacy might seem unstoppable, but in the long term, the victors will be those who are able to strike a balance between innovation, regulation, and profitability. For the time being, the market appears to be convinced, but some believe they will not be able to pay the bills.
