As Alphabet Inc. (GOOGL) gears up to report its second-quarter earnings on July 23, all eyes are on the company’s rollout of “AI Overviews” — its new generative artificial intelligence search product. This anticipation comes as Google stock has surged by 32% in 2024, fueled by investor enthusiasm for generative AI’s potential across the technology sector.
On July 10, Google stock hit a new intraday high of $191.75 but ended the day slightly down. The following day, major tech stocks, including Nvidia (NVDA) and Meta Platforms (META), saw a sell-off, with Google shares retreating by 2.9%. The Nasdaq Composite also dipped nearly 2%, though it remains up 24% for the year.
The Market’s Pulse
“The AI trade is under increasing scrutiny,” noted Goldman Sachs analyst Ryan Hammond in a research note, highlighting the market’s cautious stance on AI investments.
A pivotal concern for investors is the impact of generative AI on Google’s core internet search advertising business. Google has integrated its Gemini AI model and chatbot AI technology into its search engine, a move that could significantly influence its advertising revenue.
Economist Ed Yardeni offered a positive perspective following June’s lower-than-expected Consumer Price Index (CPI) report. “It does increase the odds of a cut in the federal funds rate in September,” Yardeni stated in a report. “That supports our expectations for the stock market rally to continue and to broaden out from the MegaCap-7. Indeed, the Russell 2000 rose, while the S&P 500 and Nasdaq declined as investors rotated into S&P 600 SmallCap and S&P 400 MidCap stocks. These so-called ‘SMidCaps’ have been weighed down by high interest rates and have remained relatively cheap since the Fed tightened monetary policy.”
Evaluating Google’s Stock Valuation
Google’s upcoming Q2 financial results will be crucial in assessing the valuation of its stock and the broader group known as the Magnificent Seven.
Despite the notable gains in Alphabet’s stock this year, determining whether the internet giant is a buy depends on both fundamental and technical factors, as well as individual investor goals, strategies, and risk tolerance.
Alphabet is currently ranked No. 20 on the IBD 50 list of growth companies and is also featured on the IBD Big Cap 20 and IBD Stock Spotlight lists.
Heading into the Q2 earnings report, 16 out of 19 analysts polled by Visible Alpha rate Google stock as a buy, while three analysts have a hold rating on GOOGL stock.
As the market waits for Alphabet’s earnings report, the question remains: Is Google a buy or sell? Investors will need to weigh the company’s AI advancements against broader market trends and individual investment strategies.
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