Google's AI dominance is stable, and the stock price has risen but is still worth it! Investors can't miss it!

Over the past year, the stock market has been predicting that Alphabet Inc. (NASDAQ: GOOG, NASDAQ: GOOGL), or Google, will decline due to OpenAI's generative artificial intelligence threat. Although Google did not perform well in the initial launch of some artificial intelligence products, as a leading investor in artificial intelligence technology, the company seemed to be back on track after the I/O developer conference. Although its stock price has recently risen above $175 and no longer offers deep discounts, I am still optimistic about this stock.

For Google, the biggest threat is generative artificial intelligence technology from OpenAI and Microsoft (MSFT), which could replace its leadership in search. Search is Google's biggest source of revenue and profit so far, and users getting answers from ChatGPT or CoPilot may soon replace valuable searches on Google.

The company has transformed Gemini into a search generation experience, making the current search experience more natural, more personal, and more impactful. They want Google search users to continue using Google and begin integrating generative AI tools into existing searches, eliminating the need for ChatGPT.

As of April 2024, Google still has a market share of nearly 91% of the global search market, although this figure is down from nearly 93% the previous year. Bing's share of the global market has reached nearly 4%, and its US market share has now reached 8%.

Google generates nearly $200 billion in annual sales each year through its search-related advertising business. According to the data, this search tool still controls more than 90% of the global market share, but it is unclear whether the data fully includes all search market shares, such as searches carried out on OpenAI chat tools.

One good sign is that AI is likely not only to boost revenue, but at least not to impact the business, as search and cloud services departments both reported accelerated revenue growth, and the first quarter of 2024 performed as follows:

Google Search - $46.16 billion, up 14.4%

YouTube ads — $809 million, up 20.9%

Google Network - $741 million, down 1.1%

Google Subscriptions, Platforms, and Devices — $884 million, up 17.9%

Google Cloud Services - $957 million, up 28.4%

Other bets - $49.5 million, up 71.9%

Another way to check the impact of the search market is to look at the rate of revenue growth in this segment. Sales growth accelerated to 14.4% in the first quarter and rebounded after a slight decline in the fourth quarter of 2022.

OpenAI launched ChatGPT in November 2022. The data may indicate that the boom in artificial intelligence has led to an increase in demand for search, and Google is participating as a by-product. Now, due to the integration of generative AI tools into search, and the latest addition of Gemini, which has already driven growth, the company will achieve further growth in the future. Of course, the 2022 data is still challenging compared to the huge growth the company reported during the Covid surge in 2021 to early 2022. As mentioned above, the fourth quarter of 2022 faced a difficult comparison of a sharp increase of 35.7% in the fourth quarter of 2021, while strong growth in the fourth quarter of 2020 was not included in the chart. Additionally, the company announced the launch of AI Agent and other AI tools. These AI products are expected to continue to drive the growth of search and cloud products, and BoA analyst Justin Post maintains a positive attitude towards Google's $200 price target based on the success of I/O. Gemini Advanced is now available for $19.99/month. The premium version has new exclusive features and the ability to upload documents and PDFs to get abstracts and answers.

ChatGPT has millions of subscribers using a $20 monthly generative AI subscription service. The AI company reports that its revenue has reached $2 billion in annual operations and plans to double that figure by 2025. While Gemini Advanced may not be able to catch up with OpenAI, the key is that it ensures that Google Search remains the market leader.

Now that the stock price has soared to $175, Google is no longer as cheap as it used to be, especially when the stock price fell below $100 in 2022. The tech giant has returned to a steady growth pattern, with analysts predicting growth of more than 10% over the next few years.

Currently, Google's revenue is generally expected to reach $8.56 by 2025, which will grow by nearly 14% next year. The stock is trading at just 20 times the GAAP figure, but after excluding significant share-based compensation, Google's appeal remains strong. If investors are optimistic about this company and want to enter the market, they may wish to regularly monitor stock prices at traditional brokerage firms such as Yingtou, Jiaxin, and Tiger, or BiyaPay, a new multi-asset trading wallet, and buy or sell stocks at the right time. Among them, BiyaPay can not only deposit USDT to trade US stocks and Hong Kong stocks, but also deposit USDT to withdraw US dollars and Hong Kong dollars to a bank account, and then withdraw fiat money to invest in other securities. This method can be said to be fast, has no quota limits, no deposit and withdrawal problems, and can also keep an eye on stock market trends at any time, making it ideal for investors to invest in Google.

Google spent $22.5 billion on share-based compensation (SBC) in 2023, and the company's spending in the first quarter was relatively flat at $5.3 billion. By the end of March, the number of employees decreased by nearly 10,000 to 181,000 year-on-year, indicating that SBC is likely to remain at a similar level in 2024.

At a 15% tax rate, the tradable shares are approximately 12.5 billion shares, and the impact on earnings per share is approximately $1.53. According to the 2025 EPS target, Google's non-GAAP EPS is expected to be $10.09. The stock is trading around 17 times what EPS expected.

Google is already the cheapest of the big tech stocks, trading at just 20 times GAAP's expected earnings per share. The stock is much cheaper than other artificial intelligence companies, and Microsoft is trading at nearly 32 times the expected earnings per share target. Meta Platforms (META) and Apple (AAPL) are both increasing opportunities in the field of artificial intelligence and trading at slightly higher forward price-earnings ratios, and Apple's current growth opportunities fall far short of Google's.

As mentioned above, Google's stock price is even cheaper than the group, only 17 times the adjusted earnings per share target, while the company's net cash balance is $95 billion.

What investors need to pay most attention to is that even if Google's stock price is at an all-time high, its price is still reasonable and low. The tech giant may no longer be the hot low price stock of the past few years, but the company successfully crossed the AI minefield, and despite initial mistakes, it was still the winner.

Thanks to technology unveiled at the I/O conference and the undervaluation of stocks, Google remains the best way to participate in generative AI. The company should benefit in many ways. Increased demand for AI-driven search and further rising demand for Google Cloud will take the company to the next level of business approaching $10 billion in quarterly revenue. Investors should use the current price to buy Google shares and increase their holdings substantially whenever the price is weak.

Finally, Xiaobian reminds everyone that investing is risky. I hope all investors will consider it carefully. I wish everyone a good return on investment!

Source: Seeking Alpha

Edited by BiyaPay Finance