Google’s Resurgence: A December to Remember
As the year draws to a close, Alphabet’s stock (GOOG, GOOGL) is experiencing a remarkable resurgence, defying the weight of antitrust enforcement and intense competition in the AI space. This late-year surge is unprecedented among Big Tech platforms, with shares rising an impressive 14% this month, outshining even Tesla (TSLA).
Catalysts for Growth
Back-to-back breakthroughs have fueled this upward trend. A quantum computing milestone and the demise of a key rival in the robotaxi market have lifted shares in the final weeks of 2024. These developments have punctuated a year marked by rediscovery, rather than transformation.
Rediscovering Alphabet’s Mojo
According to Michael Smith, senior portfolio manager at Allspring Global Investments, “The stock market rewards mystery and open-ended opportunities, and Alphabet still has its mojo – the recent announcements were a reminder of that.” Despite Google’s 40% year-to-date gains, the company’s stock price growth lags behind the Magnificent Seven average of about 64%. However, this gap is precisely why analysts see buying opportunities.
Changing Perceptions
Google’s end-of-year rally highlights shifting perceptions of the company. Earlier this year, Google was seen as playing catch-up to Microsoft (MSFT) and OpenAI in the AI tools market. However, Mountain View has since worked to even the playing field. “People have been worried about the innovator’s dilemma affecting Google’s commitment to staying on the right side of change,” said Smith. “More recently, it is clear that Google has the capabilities to stay at the front of the industry.”
AI Overviews: A Game-Changer
Google’s AI Overviews, an overhaul of its core search product, represents a significant development. While questions remain about monetizing AI-inflected search without cannibalizing its proven business model, CEO Sundar Pichai has reported increased user engagement. “If we get more confirmation that AI accelerates search growth, that would represent a major change to consensus thinking and lead to more upside for Google shares,” said Smith.
Quantum Computing Breakthrough
Google’s latest quantum chip, capable of performing a benchmark computation in under five minutes that would take existing supercomputers 10 septillion years to solve, has further boosted investor confidence. Commercial applications are still a ways off, but this innovation illustrates Alphabet’s commitment to tech innovation, a key driver of stock sentiment.
Waymo’s Robotaxi Advancements
The demise of General Motors’ (GM) Cruise robotaxi business has given Waymo, Google’s sister company, a significant boost. The release of Gemini 2.0, a large language model, has further solidified Google’s position in the AI space.
Regulatory Scrutiny
While Google’s branching ambitions have attracted intensifying regulatory scrutiny, the market has largely shrugged off immediate concerns of a drastic shakeup. Even an adverse final decision and implementation are years away, and the incoming administration can change the calculus in Big Tech’s favor.
A Turnaround Story
For now, investors are clinging to a 2024 turnaround story. Despite legal uncertainty, Alphabet’s recent announcements have overshadowed concerns, and the company’s stock is poised to continue its upward trend.
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