Alphabet stocks (GOOG, GOOGL) are enjoying a resurgence in December, weighed down by sweeping antitrust enforcement and fierce competition for AI turf. No Big Tech platform has risen as much in the second half of this year. And excluding Tesla (TSLA), Google’s parent company’s stock has outperformed the rest of the Magnificent Seven, rising 14% this month.
A flurry of catalysts, from breakthroughs in quantum computing to the demise of the robotaxi market’s main rivals, pushed stocks higher in the final weeks of 2024. These catalysts punctuated a year defined more by rediscovery than transformation.
“Stock markets reward mystery and open-ended opportunities, and Alphabet still has that prestige, and recent announcements are a reminder of that,” said Michael Smith, senior portfolio manager at Allspring Global Investments. ” he said.
By the numbers, even Google’s year-to-date return of 40% is lower than the Magnificent Seven’s average of about 64%. The company’s stock price growth has significantly lagged Nvidia’s (NVDA) rise to the top of the charts, Meta’s strong comeback story, and Tesla’s post-Trump rise. But the gap between Google’s stock price growth and that of the best-performing tech companies is part of why analysts see it as a buying opportunity.
Google’s year-end gathering also highlights changing perceptions of the company. Earlier this year, Google was still expected to catch up with Microsoft (MSFT) and OpenAI in the fast-growing market for AI tools, but Mountain View has since been working to reach a level playing field.
“People are concerned that the innovator’s dilemma will impact Google’s efforts to stay on the right side of change,” Smith said. “More recently, it has become clear that Google has the ability to stay ahead of the industry.”
Google’s AI Overview was the company’s most publicly available AI product and represented an overhaul of the company’s core search product. And while questions remain about how well the company will be able to monetize AI-powered search without cannibalizing its proven business model, CEO Sundar Pichai said the company’s overview of AI is focused on user engagement. He said that this led to an increase in
“If we get further evidence that AI will accelerate the growth of search, that would represent a major shift in consensus thinking and lead to further gains in Google stock,” Smith said.
Hannah Howard, portfolio manager at Gabelli Funds, said OpenAI may still have a first-mover advantage in the generative AI space. But with large, well-funded companies like Google spending meaningful capital developing their own AI capabilities, it’s difficult to maintain that advantage over time.
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