How AI Could Give Google a Boost, as Worries About Costs Drive Stock Lower

Shares of Google genitor Alphabet (GOOGL) mislaid crushed Wednesday amid concerns astir nan tech giant's spending connected artificial intelligence (AI) investments, contempt an earnings beat. However, respective analysts suggested worries astir costs could beryllium overblown, and raised their value targets for nan banal connected Google's strengths, arsenic good arsenic early benefits from AI.

Citi analysts raised their value target for nan banal to $212 from $190, while J.P. Morgan analysts lifted their value nonsubjective to $208 from $200. Alphabet shares were down adjacent to 4% astatine $176.94 in intraday trading Wednesday, though they've still gained complete 25% since nan commencement of nan year.

Google Cloud and Search Strength Aided by AI

J.P. Morgan analysts highlighted Alphabet's "notable strength" successful search, Google Cloud, and nan company's operating income. They added that nan institution "remains connected nan violative successful GenAI," integrating Gemini into "nearly all" Google products.

During nan company's net call, Alphabet CEO Sundar Pichai said successful increasing spending to put successful AI infrastructure, nan institution is combatting nan "risk of underinvesting."

Citi analysts said they are "incrementally positive" connected Alphabet shares aft nan 2nd 4th net report, and were "encouraged pinch AI Overviews improving hunt engagement suggesting greater traction crossed Google’s GenAI tools."

Tougher Second Half Ahead

Jefferies analysts, who raised estimates but maintained their $220 value target, noted that Alphabet could person an "uphill climb ahead" pinch a tougher 2nd half of nan twelvemonth for its advertizing business, arsenic good arsenic an expected deceleration successful hunt and YouTube.

"Despite nan tougher comps, we expect GOOGL tin grind higher successful 2H acknowledgment to continued spot successful halfway Search, imaginable for Google Cloud to further accelerate connected AI, and further separator surprises," nan analysts said.