Why Shares of Alphabet (Google) Are Soaring Today
Shares of Alphabet (GOOG, GOOGL) surged approximately 8.4% following a federal judge's ruling that the company will not have to divest its Chrome search business amid a DOJ lawsuit alleging monopolistic practices. The ruling is seen as a significant victory for Google, allowing it to maintain partnerships with major companies like Apple. However, Google must avoid exclusive contracts that hinder competition and share some data to level the playing field. Analysts view this as a positive development for Alphabet's stock, which has been undervalued compared to its peers in the tech sector.
A U.S. federal judge ruled in favor of Google in a major lawsuit between the large tech conglomerate and the U.S. Department of Justice.
Both Class A and C shares of Alphabet (GOOG 8.91%) (GOOGL 8.94%) popped about 8.4%, as of 10:48 a.m. ET today, after a federal judge ruled that the conglomerate will not have to divest its massive Chrome search business.
A big win for big tech
In 2023, the U.S. Department of Justice filed a landmark lawsuit against Google for monopolistic practices in the search engine space, specifically related to its digital advertising practices. Last year, a federal judge sided with the DOJ and found that Google had run an illegal monopoly. The DOJ then requested that a judge require Google to divest its Chrome browser, a big driver of the company's search business that makes up more than half of the company's total revenue.
Image source: Getty Images.
While many believed this was unlikely to happen, U.S. District Judge Amit Mehta made it official yesterday, ruling that Google will not have to divest Chrome. Furthermore, Google can keep paying large partners like Apple to feature it as the default search engine on web browsers like Safari. However, Mehta also ruled that Google cannot propose exclusive contracts that prevent competitors from being able to fairly compete in the space. Google will also have to share some data that will supposedly help competitors get on more of an even playing field.
"This is a monster win for Cupertino and for Google its a home run ruling that removes a huge overhang on the stock," Wedbush's Global Head of Tech Research Dan Ives in a recent research note, according to CNBC.
A catalyst for the cheapest Mag Seven name
This year, Alphabet has traded at the cheapest valuation in the "Magnificent Seven," largely due to the DOJ's lawsuit and other issues with the search business including how artificial intelligence chatbots might disrupt the business.
But within the massive tech conglomerate are several incredibly fast-growing and strong businesses like Waymo, YouTube, Google Cloud, and even a chip business. Even after the nice move today, investors can still buy the stock.
