Goldman Sachs: Don't Doubt Google's AI Strength, Alphabet's Pullback is a Good Buying Opportunity

According to Zhitong Finance APP, Google's parent company Alphabet (GOOGL.US) has adjusted by 9% since the beginning of the year. However, in the view of Wall Street financial giant Goldman Sachs, Google still holds an absolute dominant position in the search engine field. More importantly, Goldman Sachs' analysis team believes that despite facing antitrust pressures and Google's lagging behind OpenAI in generative AI applications, Google's overall AI strength remains on par with the world's top players, including OpenAI, Anthropic, and xAI. Furthermore, Google's increasingly advanced AI technology continues to deeply integrate with its core businesses such as search engines, digital advertising, and cloud computing, which is expected to strongly drive Google's AI monetization speed ahead of global tech companies.

Goldman Sachs analyst Eric Sheridan's stock analysis team has given Alphabet a "buy" rating, emphasizing that the company's stock price adjustment presents an excellent opportunity for investors to allocate Google stock for excess returns. Goldman Sachs has set a 12-month target price for Alphabet at as high as $220, compared to Alphabet's stock price of $169.030 at the close of U.S. stocks on Monday.

Despite investors in the stock market still worrying about the AI monetization speed of tech giants, as well as the antitrust regulatory hurdles Alphabet has faced this year and the ongoing competitive pressures in its advertising and cloud computing businesses, Goldman Sachs analyst Sheridan pointed out that negative sentiment has been overvalued by the market. As long as Alphabet implements its long-term AI growth strategy, the stock price is expected to rebound.

Goldman Sachs expects the revenue from Google's "Search and Other" business to surge from $198 billion in 2024 to $318 billion in 2030, with the search engine business remaining the core engine of Alphabet's revenue. With the support of Google's AI technology, it is expected to enter a new growth trajectory. First-party data and a global data center network provide support for the deep integration of Google's AI with Alphabet's YouTube, Google Cloud Platform, Maps, and Workspace, driving the revenue-generating capabilities of these businesses to exceed expectations.

The analysis team led by Sheridan also emphasized that under the advancement of the AI developer ecosystem centered around Google AI, Alphabet's cloud computing business and digital infrastructure platform will jointly lay a solid foundation for Alphabet's future performance growth, even if short-term advertising spending faces fluctuations.

Goldman Sachs emphasizes that Alphabet is very worthy of long-term attention from investors, as limited downside risks and strong long-term cash flows from search, digital advertising platforms, and all AI-related businesses give this Google parent company sustained upward potential once short-term concerns dissipate. Alphabet will announce its next financial report data in late July, and the market will closely watch for signs of accelerated AI monetization and cloud computing business, as well as how the integration of AI and search engines will innovate and continuously drive the growth of Google's advertising business There is no doubt that Alphabet has long dominated the internet search engine field; however, the speed of AI monetization, antitrust regulatory pressures, and competition in advertising and cloud services have increasingly worried investors, leading to a decline in stock prices of about 9% year-to-date. Nevertheless, the analysis team led by Goldman Sachs analyst Sheridan believes that Alphabet's current valuation is attractive for investment, reiterating a "buy" rating, the most optimistic bullish rating, with a target price as high as $220. The core logic lies in Alphabet's long-term business portfolio advantages and the currently very favorable risk/reward profile.

Sheridan pointed out that Alphabet's current valuation has largely reflected negative sentiment, especially as the market's cautious attitude regarding antitrust actions that may force Google to split its Chrome browser business has mostly been priced in, creating a very enticing risk/reward configuration and leaving room for a significant rebound in the stock price after the company executes its long-term strategy.

The team led by Sheridan also mentioned some key advantages that are still long undervalued by the market, including Alphabet's extensive reach in the AI field and its strong ability to improve Google product experiences using first-party data and leading AI technology ahead of most peers. Overall, with limited downside risks and long-term growth potential in the search, advertising, and AI sectors, Sheridan believes that the stock remains a strong choice for investors willing to overlook short-term concerns.

Overall, TIPRANKS rating data shows that Wall Street analysts give a unanimous "strong buy" rating for the stock of Google's parent company Alphabet, with as many as 28 "buy" and 9 "hold" ratings in the past three months. Wall Street analysts have an average target price for Google of $199.14 per share within 12 months, implying about 15.95% consensus upside potential. The most optimistic expectation is that the stock price could rise to $225, while the most cautious expectation for the bottom is $185. After a relatively weak year in stock price and performance, analysts generally hold an optimistic attitude, expecting Alphabet to achieve strong investment returns in the growth trends of core markets such as AI, cloud computing, and digital advertising