Alphabet Stock Could Drop 25%

Barclays analyst Ross Sandler wrote that if a court forces Alphabet Inc. (NASDAQ: GOOGL) to spin off its Chrome browser as part of an antitrust case, its shares could drop 25%. He calls the potential event a “black swan,” which means it is very unlikely. The fact that Sandler has raised the possibility should make investors anxious.

Sandler points out, according to Yahoo, that Chrome has 4 billion users worldwide, making it the top browser by market share. He claims that Chrome accounts for 35% of Google’s search traffic. It also has other search deals, particularly with Apple’s iOS. The Apple deal, and others like it, are another reason the U.S. Department of Justice has targeted Google.

There is also concern among Alphabet investors that, if divested, Chrome could be sold to artificial intelligence (AI) leaders, which include OpenAI, the industry leader. Alphabet has tried to stay ahead of the competition in the AI sector with the Gemini product, which helps target searches people make on Google.

Google is already in an AI race with Microsoft, Meta, Amazon, and OpenAI, to name a few. The loss of Chrome browser traffic would likely put it behind these challengers. It would also open the door to a much smaller search product, Bing, which Microsoft owns. Bing also offers an AI search product called Copilot. It is part of Microsoft’s concerted effort to establish itself as an AI leader.

One comfort for investors is that Alphabet will appeal the antitrust decision. This would prolong the fight as it works its way through higher courts.

A 25% decline in Alphabet’s stock would take its price to where it was in early 2023. It would also shave $500 billion off the company’s market cap. The changes may be based on a black swan event. However, the fact that it has been raised means it cannot be entirely discounted.

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