Google's antitrust case escapes the most severe penalty of "breakup"! AI search competitors benefit very little, multiple investment banks raise target prices
The remedial order issued by a U.S. district judge in the Google antitrust case shows limited benefits for AI search competitors. Google successfully avoided the harshest penalties and was not forced to divest Chrome or Android. The ruling requires Google to share data, which may provide marginal development support for generative AI search engines. Analysts point out that the scope of the sharing mandated by the ruling is relatively limited, and competitors cannot use Google's search results to train their own systems
According to the Zhitong Finance APP, U.S. District Judge Amit Mehta's remedial order regarding Google's (GOOGL.US) antitrust case, as assessed by several investment banks, may only bring limited benefits to AI-based competitors in the search engine market.
Google successfully avoided the most severe consequences—if the ruling were upheld, the tech giant could have been forced to divest its flagship products, the Chrome browser or the Android operating system. Judge Mehta's ruling on data-sharing measures may provide a moderate boost to generative AI search engine startups such as Perplexity AI, OpenAI's ChatGPT search, You.com, Andi, and DuckDuckGo.
CFRA analysts Nick Rodelli and Michael Gordon noted in their ruling analysis report: "Judge Mehta's ruling primarily focuses on the area of data sharing, which was the biggest risk point for Google before the ruling. However, we believe Google can finally breathe a sigh of relief, as the scope of sharing required by the ruling is relatively limited... Nevertheless, these measures are intended to—and we believe will—provide at least marginal developmental support for generative AI-based search or search alternatives."
The key points of the data-sharing order include search result synchronization, synthetic queries, and search index data. Search result synchronization requires Google to authorize existing licensees to access search results.
"Google's key victory in search result synchronization is that competitors cannot use these results to train their own systems, nor can they generate 'synthetic' queries using algorithms (rather than users)," Rodelli emphasized.
Regarding search index data, competitors will gain "one-time bulk access" rights, including unique identifiers for each document (including duplicate annotations), URLs, last crawl times, and spam scores.
Google is also mandated to provide competitors with the Glue and RankEmbed datasets.
"The Glue dataset includes the query content itself, user information, the top ten blue links, other functional parameters, click data, hover duration, time spent on result pages, as well as query explanations and suggestions," Rodelli explained. "This constitutes a vast data repository that excellent data analysis teams (which generative AI companies must possess) can use to optimize the search experience. RankEmbed contains search logs and human scoring data, which Google claims helps handle long-tail queries."
However, these data-sharing agreements may take years to implement—CFRA expects Google to obtain a stay of the remedial ruling. The case may then enter the appellate phase in the D.C. Circuit Court, ultimately possibly being decided by the U.S. Supreme Court.
After the ruling was announced on Tuesday, several institutions raised their target price for Google. KeyBanc Capital Markets raised its target price from $230 to $265, maintaining an "overweight" rating. "Although Alphabet has demonstrated stronger product innovation capabilities, its stock price remains below that of Meta (META) and the S&P 500 index level."Analysts led by Justin Patterson wrote in the report, "Given that the preliminary remedial measures are more favorable than expected, we believe that Alphabet's valuation multiple is likely to converge with the S&P 500, recovering to around the five-year median of 21 times."
Oppenheimer maintains an "Outperform" rating, raising the target price from $235 to $270; Needham reiterates a "Buy" rating, increasing the target price from $220 to $260. Citigroup, on the other hand, keeps the target price unchanged at $225.
"Google is likely to appeal, a process that could take years," said Citigroup analyst Ronald Joshi, "We reaffirm our Buy rating on Google due to the accelerated growth in its search and cloud business revenue in the second quarter, as well as the continuous rollout of innovative services with AI and the Gemini model."
This ruling is also seen as a victory for Apple Inc. (AAPL.US)
