A new member of the 3 trillion club? With the antitrust shadow lifting, Google is just one step away from a historic milestone

After the prolonged shadow of antitrust issues dissipated, Google's stock price suddenly broke free from its constraints. A key ruling has cleared the core risks that have suppressed its stock price for months, bringing it just one step away from the historic milestone of a $3 trillion market value.

On Tuesday, a U.S. federal judge ruled, allowing Google's parent company to avoid the harshest penalties sought by regulators, including the sale of its Chrome browser. This news propelled the company's stock price to rise nearly 10% over the past two trading days, increasing its market value to $2.81 trillion.

With the case settled, investors' attention is shifting back to Google's growth potential. The latest strong rebound began with the company's second-quarter earnings report, which showed that demand for artificial intelligence products is boosting sales. Meanwhile, Google's continuous rollout of AI products has also strengthened investor confidence in its ability to fend off competitors like OpenAI.

Notably, despite the recent surge, Google's stock remains the lowest valued among its "Tech Seven" peers.

AI-Driven Rebound Reshapes Market Confidence

Since the earnings report released on July 23, Google's stock price has risen over 20%. This surge has propelled it into the top third of the best-performing stocks in the Nasdaq 100 index this year.

However, the situation was not the same a few months ago. Concerns over antitrust risks and fears that AI startups could erode its search business, which accounts for more than half of its revenue, had caused its stock price to struggle. Just this June, when the Nasdaq 100 index had recorded positive growth, Google's stock price was still down over 10%.

Now, although the debate over the ultimate landscape of the AI field is far from over, Wall Street is increasingly confident in Google's ability to defend its territory. The AI features the company launched earlier this year have been well received, and the new Pixel phone, equipped with numerous AI capabilities, has also garnered positive market feedback. TD Cowen analyst John Blackledge wrote in a report to clients on Wednesday:

“Given the new AI search features and Google's rapid expansion of the Gemini application, we expect Google to maintain its leadership position in the traditional search space.”

Valuation Still Appealing

According to data compiled by the media, Google's current market value of $2.81 trillion is just about 7% away from the $3 trillion mark. Previously, only Apple, Microsoft, and Nvidia have reached this level.

Closing this gap may not be difficult. Currently, Google's price-to-earnings ratio is about 21 times, lower than the Nasdaq 100 index's 26 times. Meanwhile, its revenue is expected to grow by 14% this year, exceeding the growth rate of that benchmark index Neville Javeri, a senior fund manager at Allspring Global Investments, commented on the court ruling:

"This clears the way for additional growth opportunities."

He believes there is "incredible opportunity" for the stock, as the decision "creates a growth opportunity that they might have been deprived of."

Liam McGarrity, a U.S. investment analyst at Harris Oakmark, also stated:

"This stock still looks very attractive because it has so many high-growth quality businesses."

Technical Overbought and Long-term Concerns Coexist

Despite improving market sentiment, Google's upward momentum may be difficult to sustain in the short term. The stock's 14-day Relative Strength Index (RSI) has surged above 83, the highest level since 2017, well above the 70 threshold that technical traders typically consider "overbought." Additionally, the current trading price of the stock is in line with analysts' average target price, indicating that Wall Street believes its short-term upside is limited.

Barton Crockett, an analyst at Rosenblatt Securities, reiterated his neutral rating on the stock in a report on Wednesday. He wrote that it is "understandable for investors to feel reassured about the short-term risks dissipating," but "long-term concerns about competition in the search business will limit its valuation multiples."

However, for investors optimistic about its future, the key to holding Google lies in believing in its ability to maintain its leadership in the AI field and sustain growth. As Liam McGarrity noted:

"When you consider that, despite having industry-leading AI technology and tremendous potential in businesses like Google Cloud and Waymo, its trading price is even cheaper than the overall market level, it seems to be at a significant discount."