Analyst sends Alphabet warning amid major market shakeup

Google faces major challenges.

Jun 24, 2025 - 16:32

Analyst sends Alphabet warning amid major market shakeup

Do you trust Google? Would Google lie to you?

I just "googled" pizza. Now lying hidden behind the tools section is what used to be front and center: a ridiculous estimate of 2,030,000,000 search results. I clicked on the last page of search results, and voilà, it now says: Page 18 of about 179 results.

What a lie. But if you are making an estimate it is OK. You can estimate whatever you want. All's fair in love and war, and business I guess.

But what about the measly 179 pages it found? Am I living the Truman Show? I guess my island is just a little bit bigger than Truman's, and that is why I got 179 results. I hope you will agree that it is extremely improbable that there are only 179 web pages containing word pizza on the internet.

We all trust Google. We have to. There is no better search engine available yet, sadly. We are all stuck inside these hideous bubbles. Little prison islands.

Things are changing and not for the better. Many people now do their searches with reddit.com in the search query, to find the information they are looking for on Reddit. They are replacing one bubble with another.

Google is facing strong AI compettition, le OpenAI.
Jakub Porzycki/NurPhoto via Getty

Google search: The serpent eating its tail

When Google launched the artificial intelligence overview feature last year, it quickly turned into a scandal. AI was giving "amazing" advice to people, like telling them to use glue to stick cheese to pizza. Eating rocks is fine, as long as you stick with one a day.

The problems were quickly patched, but the issue is that the number of potentially dangerous hallucinations is infinite. You have to keep patching the damned thing ad infinitum. Does that sound like a good and viable plan to you?

In their National AI Opinion Monitor: AI trust and knowledge in America, Katherine Ognyanova, and Vivek Singh from Rutgers University, write: "Americans across all demographic groups trust information produced by mainstream media journalists more than AI-generated information. Overall, 62% trust journalistic content “some” or “a lot”, compared to 48% who trust AI content."

This statistic tells me that people have a short memory, and that the previously mentioned incident is now ancient history.

Google is faced with a new kind of competition, which now doesn't have to crawl the "whole" internet to provide search results. The agentic AI era has led us to internet scraping of a lesser scale being able to provide the answers to user's queries in the form of chatbots. For some users (perhaps the 48% mentioned before) these answers are good enough.

The company is pushed into providing the same service. But there is a negative side effect that will slowly unravel.

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AI powered search services are causing "zero-click" searches. Users get their answers directly on the search page, they don't need to visit any website. Websites that create valuable content get less traffic. This will result in fewer websites offering good content, and in turn, make the search worse. That is the serpent eating its tail.

Bank of America analysts raise red flag on Google

Bank of America analysts, Justin Post and Nitin Bansal, shared their opinions on the Alphabet (GOOGL) / (GOOGL) stock.

"The starting point for access to information and transactions will shift from browser based to mobile O/S [and] app based, with at least 5 tech titans (Amazon, Apple, Google, Meta, OpenAI) targeting the opportunity. This shift will erode Google's long-standing competitive moats and reduce usage share," said analysts.

Analysts noted three important threats for Google:

OpenAI is well-funded for the near term. It is scaling rapidly and is likely to introduce ads.
Meta could launch Agentic AI capabilities to its 1 billion assistant users.
Amazon has built an agent that can shop across other sites.

They set the price objective of $200/$200, retaining the buy rating, based on 18 times the estimate for core Google GAAP earnings per share plus cash per share estimate for 2026. Alphabet has traded at an average multiple of 22 times GAAP price-to-earnings ratio over the last ten years.

Analysts concluded that their multiple is reasonable compared to history given expectations for double-digit revenue growth, cloud margin expansion, and opportunity to capitalize on strong AI assets.

However, it remains to be seen how AI will transform search, and whether Alphabet's Google will be able to maintain its dominance.