GOOG: Look Closer at its AI Impact ! Buy ?
After hitting an all-time high in early July 2024, Google stock swooned.
Slowly but surely, stock $Alphabet(GOOG)$ clawed back above its 200-day moving average and now has neared its 50-day moving average, in a bullish development. (see below)
Google and its Moving averages of 200, 50 & 20
Artificial Intelligence - Gemini.
More importantly, Google is making definitive & decisive moves to solidify its AI presence.
At the recent “Gemini @ Work” event, Google highlighted a 35-fold increase in the usage of its Gemini platform, a generative artificial intelligence chatbot.
The event featured 185 AI integration illustrations, across various enterprises, from healthcare providers to car makers to retailers.
Salient examples of AI at work:
$Volkswagen AG(VWAGY)$ of America has integrated Google Cloud's AI into its myVW mobile app, where drivers can explore their owners’ manuals and ask questions like “how to change a flat tire.”
$Snap Inc(SNAP)$ has collaborated with Google Cloud, too. The social media giant is using Google's AI technology to enhance its My AI chatbot on Snapchat. This partnership allows Snap to offer more interactive features, utilizing Gemini's ability to process text, audio, images, and video.
$Warner Bros. Discovery(WBD)$ have also deployed an AI-powered captioning solution using Google Cloud's Vertex AI platform, which reduces the time and cost of captioning while improving accuracy for unscripted programming.
Generative AI is driving growth in the cloud computing market, where Google ranks 3rd behind $Amazon.com(AMZN)$ and Microsoft (MSFT)$.
Amazon now leads the market with a 32% share, while Google, with 12%, is gaining momentum alongside Microsoft as of Q2 2024.
Other AI Endeavours & Progress.
Google aims to counter Microsoft's investment in OpenAI by making its own generative AI tools available to software developers.
Google's large language model (LLM) is “Gemini”.
The impact of generative AI on Google's core internet search advertising business remains a key issue.
Google has embedded its (a) Gemini AI model tools and (b) chatbot AI technology into its search engine.
Google began widely deploying AI Overviews in US from mid May, with conversational summaries topping links for many search queries. It also plan to expand AI Overview's availability globally to 1 billion users by end 2024.
Google stock is getting a boost from the Performance Max advertising platform that automates buying across (a) YouTube, (b) internet search, (c) display, (d) Gmail, (e) maps and (f) other applications.
Performance Max allows advertisers manage campaigns across all Google ad inventory. Advertisers that use the tools convert more shoppers into buyers, Google says.
In cloud computing, Google's cloud unit has upped capital spending targeting the new opportunity in generative AI.
According to Synergy Research Group, global enterprise spending on cloud infrastructure services in Q2 2024 hit $79 billion, up +22% YoY.
Google's 2022 acquisition of cybersecurity firm Mandiant for $5.4 billion seems to be paying dividends. Mandiant is part of Google's cloud-based cybersecurity services.
According to IBD report, Alphabet's money-losing "Other Bets" and Moonshots are company assets that investors should monitor for new developments.
While the roll-out of robo-taxi services by Waymo has lagged expectations, nonetheless it's still regarded as a leader in autonomous vehicles.
Q2 Earnings & AI Growth’s contribution.
Alphabet - Google's parent company, recently reported strong growth in its cloud segment, reflecting strong AI demand.
In its Q2 2024 quarterly earnings (in July 2024), it reported:
Earnings per share (EPS) of $1.89, slightly above the $1.84 forecast.
Revenue hit $84.74 billion, up +14% YoY, surpassing analyst expectations of $84.19 billion.
AI’s contribution to company’s earnings.
Google's advertising segment, which includes Google search and Youtube ads, continues to account for the largest portion of total revenue.
The segment generated $64.6 billion for the quarter, accounting for 76% of total revenue and reflecting an 11% YoY growth.
Google cloud segment, though representing only 12.2% of total revenue, experienced significant growth, with revenue rising +28% YoY to $10 billion, reflecting AI growing adoption across enterprises & consumers.
Alphabet highlighted its accelerated efforts in AI in July’s earnings release, with advancements being developed across (1) Google Research and (2) Google DeepMind.
As confirmed by CEO, Sundar Pichai - “We are innovating at every layer of the AI stack”.
“Unfortunately” US Justice Department is concerned of Google's strong hold in search could lead to an unfair advantage in AI development and is running an antitrust trial against Google, that has started in early September 2024.
According to Bloomberg, the DOJ is considering restrictions like:
Google’s use of website content for AI products.
Spinning out its Chrome browser or Android operating system.
Alphabet's Future - Analysts’ views
Analysts have mixed reactions to Google's AI advancements.
Tigress Financial has raised Alphabet's price target to $220 from $210, keeps a “Strong buy” rating and cited ongoing strength in Google’s search & cloud segments, according to thefly.com.
The analyst expects Gemini generative AI to (i) keep fueling revenue & cash flow growth and (ii) highlights that the raised price target indicates a potential return, including dividends, of over 36% from current levels.
JMP Securities analyst Andrew Boone reaffirmed positive views following the Gemini event, maintaining an “Outperform” rating and a $200 price target on Alphabet shares.
Oppenheimer, on the other hand, has lowered its price target for Alphabet to $185 from $210, with an “Outperform” rating. It noted that while the impact of Google Search being labeled a monopoly is uncertain, investors are factoring in the potential loss of exclusivity with Apple Inc (AAPL) , likely limiting Alphabet's P/E ratio to 20x.
Currently, Google earns 31% of its Gross search revenue from Apple devices and pays 36% to Apple for this exclusivity, that results in 19% net ad exposure, the analyst says.
Stock Performance YTD.
As of Thu, 26 Sep 2024 - Alphabet stock is up +17.8% YoY, while the S&P 500 Index is up more than +21% in the same period. (see above)
On 7 Sep 2024, Google stock hit a new all-time high of $192.46.
However, the stock pulled back sharply along with most the Magnificent Seven amid a market rotation out of the technology sector and artificial intelligence plays.
As of the market open on 23 Sep 2024, GOOG had climbed 8 straight trading sessions.
Buy or Sell Now?
Alphabet stock has turned in good and bad years recently:
In 2021, shares jumped +65%.
In 2022, it dropped -39%.
In 2023, it advanced +58%, despite mounting competition in AI and internet search.
With its Relative Strength Indicator (RSI) at “57”, the stock is neither “Overbought” or “Oversold”. (see above)
Rule of thumb - the best stocks tend to have an RS rating of 80 or better.
This implies there is still upside to Google, looking at it’s RSI.
My viewpoints : (mine only)
In my previous post (click here ! to read & help to Re-post), I have shared Microsoft’s pursue of AI is unsustainable when compared to Amazon and Google, that have their own AI-chip.
This is owing in parts (and a very huge one) to Microsoft’s heavy reliance on Nvidia AI-chips (a hugely expensive expenditure) that is powering its AI endeavour and eating into its profits simultaneously.
The abovementioned projects are potentials that Alphabet Inc.
I am convinced that Google’s transformation into an AI pure-play stock, hold greater promise for delivering higher returns and within a shorter timeframe.
Equally significant is co-founder Sergey Brin, returning effort to help the company in its pursuit of aa unified model (some call a “God model” or Artificial General Intelligence - AGI) that can handle multiple tasks in a powerful, centralized system.
As October 2024 approaches with a looming (a) 2nd interest cut and (b) a presidential election, things will look rosy for Alphabet Inc in the short to medium term.!
Must Read: Click on below titles to access. Give a like & help to repost ok. Thanks.
Do you think a Centralized AI system (aka “God” model) will be the end-all, be-all final solution ?
Do you think Google will come out triumph in the AI-race?
If you find this post interesting, give it wings! ️ Repost and share the insights ?
Do consider “Follow me” and get firsthand read of my daily new post. Thank you.
Congratulations, you have found TIGER cards. You can leave a message "Tiger is here" in the comments section of the post & win 5 Tiger Coins.
The first person to find TIGER cards. and comment "Tiger is here" in this post will receive USD 5 stock voucher.
In addition,when you find all 5 cards and post a message "Tiger is everywhere" in the comment sections below, you will get another 10 Tiger Coins.
Click here to view more details
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
Pls "Re-post" so that more get to know. Tks! Rating is important (to me).
Consider "Follow me" and get first hand read of my Daily new posts? Thanks!). Tks!!
come and play this game to win coins.
@LMSunshine @Barcode @SPACE ROCKET @nerdbull1669 @KYHBKO
'G'