Alphabet Bulls Undeterred By Biggest Antitrust Case in Decades

Alphabet Inc. is embroiled in one of the most serious antitrust cases to threaten Big Tech in decades. In the stock market, where other megacaps have started to buckle, traders seem unconcerned.

(Bloomberg) — Alphabet Inc. is embroiled in one of the most serious antitrust cases to threaten Big Tech in decades. In the stock market, where other megacaps have started to buckle, traders seem unconcerned.

Instead of focusing on risks related to the US case, investors are seeing a relatively inexpensive stock with strong revenue growth prospects and the assets to make Alphabet an artificial intelligence winner. The shares are showing resilience at a time when soaring interest rates again stoke recession fears, while recently outperforming Inc. and Apple Inc. 

“If you look at stability of earnings, Alphabet is right near the top of that list,” said Matt Miskin, co-chief investment strategist at John Hancock Investment Management. “It is a major quality stock, and given that it trades a bit cheaper than peers and should be a major player in AI, it is hard to not like the relative value opportunity.”

Shares of Alphabet rose 0.9% on Wednesday. The Nasdaq 100 Index gained 0.6%.

Alphabet shares have soared 51% this year and are less than 4% from a September high, while Amazon and Apple are down more than 12% from recent peaks.

The Justice Department’s case targets Alphabet’s search business, which it alleges maintains a monopoly by paying rivals to make its engine the default on web browsers. The US wants Alphabet to change its business practices and potentially pay damages and restructure itself.

Search was the source of fears earlier this year, fanned by the rocky debut of Alphabet’s ChatGPT rival, Bard. But concerns about the Google-owner’s dominant position in search have subsided as its market share has barely budged from about 84% since ChatGPT was released in November. Meanwhile, Microsoft’s rival Bing search engine, which has incorporated ChatGPT-powered features, has remained steady at about 9%, according to the latest available data from Statista.

Recovering demand for digital advertising is helping to push Alphabet’s revenue and profitability estimates higher. Analyst projections for 2024 profit have risen 7.8% in the past three months, while sales estimates are up 1.9%, according to the average of analyst estimates compiled by Bloomberg. 

Unlike many of the biggest internet and technology stocks, Alphabet doesn’t come with a nosebleed valuation. Shares trade at less than 20 times estimated earnings, a discount to the Nasdaq 100 Index, and below the stock’s average multiple over the past decade. In contrast, Apple and Microsoft Corp. are at premiums to the market and their own history.

“Ultimately, Alphabet offers premium earnings growth, a very strong capital return profile, a lot of visibility, a very strong market position, and it is a leader in AI,” said Michael Scanlon, portfolio manager at Manulife Investment Management. “Yet, its valuation is in line with the S&P 500. That makes it incredibly attractive, and very compelling here.”

Alphabet has been investing heavily in artificial intelligence related projects for years, which has yielded some of the technological breakthroughs underpinning the latest AI wave. The company has also begun to experiment with incorporating generative AI into its search engine.

The antitrust suit is unlikely to impair the business, according to Scanlon. And a worst-case scenario — where the Justice Department wins and the company is broken up — could end up being a positive catalyst, he said.

“Alphabet trades incredibly well on a sum-of-the-parts basis, and the stock doesn’t reflect the value of all the businesses,” he said. “If it were ever broken up, investors would be very excited to get their hands on individual parts.” 

Tech Chart of the Day

After the Nasdaq 100 Index fell 8.1% from its mid-July high, as of its last close, every constituent of the gauge is now expected to rise over the next 12 months, according to average price targets. It’s been about a year since the last time all Nasdaq 100 firms had a positive return potential.  

Top Tech Stories

  • Intel Corp. plans to turn its programmable chip division into a standalone business and sell shares to the public or seek an investor for it, part of Chief Executive Officer Pat Gelsinger’s efforts to wring more value from the semiconductor company.
  • Apple Inc. was downgraded at KeyBanc Capital Markets Inc., which said shares of the iPhone maker are trading near all-time high valuation levels though its sales growth is likely to slow.
  • Palantir Technologies Inc., the data analysis firm co-founded by tech billionaire Peter Thiel and contracted by government intelligence agencies and military forces around the world, has emerged as the top pick for a contract to overhaul the UK’s National Health Service.
  • Jony Ive, the legendary Apple veteran who helped design the iPhone and iPad, is turning his attention to a different kind of device: a mobile blender for fruit smoothies.
  • Zoom Video Communications Inc. is adding word processing to its suite of tools and experimenting with novel features for meetings as it faces steep competition from Microsoft Corp.’s Teams.

Earnings Due Wednesday

  • No major earnings expected

–With assistance from Julia Love, Subrat Patnaik, Tom Contiliano and Rheaa Rao.

(Updates to market open.)

More stories like this are available on

©2023 Bloomberg L.P.