YAHOO
Shares of Google-parent Alphabet Inc (NASDAQ:GOOG) dropped over 5% on Nov. 21 as prosecutors outlined certain proposals that would significantly alter how the search giant conducts its business. Soon after, Google shares rallied once again with the company introducing Willow, a quantum computing chip that promises to revolutionize the world in the long run. Investors, amid these exciting quantum computing developments, seem to have forgotten the threat posed by lawmakers. Trading at a forward P/E ratio of 25, Google is no longer cheaply valued from a historical viewpoint as the company has traded at an average P/E of 23.3 in the last five years. Given this rich valuation, a negative outcome from the antitrust trial may have significant implications for Google stock price in the foreseeable future.
In September, a court ruling found that Google violated antitrust laws for having a monopoly over the search engine business. With the DOJ suggesting Alphabet to sell Google Chrome and share data with rivals, concerns about Google’s future direction have suddenly come to light. Let’s have an overview of the whole case process.
The background
Google started its journey in Silicon Valley as a startup with an innovative way to search the emerging internet. Now, it has grown synonymous with the internet and is one of the wealthiest companies on the planet, with a market value of over $1 trillion and annual revenue exceeding $160 billion.
General search engines are primarily distributed on mobile devices and computers, which contain web browsers and other search access points. Over the last decade, internet searches on mobile devices have grown rapidly, surpassing searches on computers. As a result, mobile devices have become the most important avenue for search distribution in the United States, making them an essential tool for businesses to reach consumers effectively. Google understood the importance of being the default mobile search engine, and to ensure this, the company has aggressively partnered with mobile device manufacturers. As the below chart illustrates, Google’s dominance has remained unrivaled despite the threat posed by the rise of generative AI applications such as ChatGPT…
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