Google: AI Skeptics Proven Wrong as Business Booms

Alphabet Company Overview

Zacks Rank #3 (Hold) company Alphabet (GOOGL) is the web search king and one of the most innovative tech companies in the world. Over the past few years, the company has evolved far beyond being simply a search engine provider to artificial intelligence, cloud computing, ad-based video, music streaming, autonomous vehicles, healthcare, and more. In the online search arena, Google has a monopoly, accounting for 90% of search volume and market share. Over the years, the company has witnessed an increase in search queries, driven by ongoing growth in user adoption and usage, primarily on mobile devices, continued growth in advertiser activity, and improvements in ad formats.

Google’s AI Business is Booming

As the AI revolution gained steam in 2022, one of the main concerns for Google investors was that AI would cannibalize its bread-and-butter search business. Not only has that not occurred, but actually, the opposite has. Monthly usage of Google's AI products surged sevenfold in a single year, reaching a staggering 3.2 quadrillion tokens processed. Additionally, AI has actually spurred search engine growth. Google’s AI Overviews are now embedded in roughly 55% of all web searches, reaching over 2 billion monthly users.

Meanwhile, Google Cloud has experienced robust 63% year-over-year growth driven by its enterprise AI solutions. Also, CEO Sundar Pichai noted that revenue specifically generated from products built on Google’s generative AI models grew nearly 800% year-over-year. All this has led to strong revenue expectations. Zacks Consensus Estimates suggest that GOOGL will grow revenue at a 20%+ rate for the foreseeable future.

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Google Investments Thrive

While most investors think of Google as mainly an operator, its investments are arguably the strongest on Wall Street. Google owns 7% of SpaceX and 14% of Anthropic, two of the largest IPOs in history, which are expected to be listed this year. Its $900 million investment in SpaceX is now worth $126 billion, and its $13 billion investment in Anthropic is now worth $135 billion.

Google Chart Analysis

Google shares are retreating to an extremely high-probability confluence area, including a daily gap fill, breakout retest, and rising 50-day moving average.

Image Source: TradingView

Bottom Line

Alphabet has successfully silenced early skeptics who feared the artificial intelligence revolution would cannibalize its core business. Instead, AI has acted as a massive growth accelerant, supercharging both its legacy search monopoly and its hyper-growth cloud ecosystem.

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This article originally published on Zacks Investment Research (zacks.com).

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