Aug. 24, 2023 8:00 PM ET Alphabet Inc. (GOOG)
, GOOGL
- Google’s AI-powered Search is accelerating growth, with total Q2 revenues increasing by 7% and Search growth rebounding to 5%.
- Competitors’ generative AI chat platforms, such as Microsoft’s Bing with ChatGPT, have had limited impact on Google’s revenue growth.
- Google is well positioned to benefit from the growing generative AI market, estimated to reach $1.3 trillion by 2032.
- The stock remains cheap at 15x EV/EPS targets for 2024.
This article discusses Google’s position in the AI and generative AI chat market and its potential for growth. Here are the key points from the article:
- AI-Powered Search: Google’s Q2'23 results showed that AI is set to power its search, not replace it. The company reported a 7% increase in total Q2 revenues, with Search growth rebounding to 5%. Despite Microsoft’s launch of Bing with ChatGPT, Google’s revenues continued to grow, and the impact of competitors’ generative AI chat platforms on its revenue growth has been limited.
- Market Dominance: Google maintains a search market share of over 92%, according to StatCounter. The article suggests that users who initially shifted to ChatGPT may have returned to Google search.
- Generative AI Market: Google is well-positioned to benefit from the growing generative AI market, which is estimated to reach $1.3 trillion by 2032. This market includes AI-driven ad spending and generative AI assistant software, offering significant growth opportunities for Google.
- Google Cloud: Google Cloud is also focusing on AI, with a strong emphasis on AI-optimized infrastructure and serving generative AI models. The company aims to outgrow the industry in the coming years and has a substantial presence in the generative AI market.
- Robotaxis: Google’s expansion into the robotaxi market is mentioned as another area where AI will play a pivotal role, particularly as regulators approve the operation of these services.
- Earnings Growth: Google’s accelerating revenue growth is leading to analysts increasing their earnings-per-share (EPS) targets. Despite some rising infrastructure costs, the company’s earnings outlook remains positive. Consensus GAAP EPS estimates for 2024 are $6.58, with potential for growth as revenue continues to expand.
- Valuation: The article suggests that Google’s stock is cheap, trading at only 15 times EV/EPS targets for 2024, especially when compared to other tech giants trading at higher multiples.
In summary, the article highlights Google’s strong position in the AI and generative AI chat market, its dominance in search, and its potential for continued growth. The stock is considered undervalued relative to its growth prospects and compared to peers in the technology sector.
