Analyst Explains Why Alphabet (GOOG) is ‘Real Alpha’ for Portfolios

Alphabet Inc (NASDAQ:GOOG) is one of the 10 Stocks to Watch in July as AI Enthusiasm Returns.

Mark Mahaney, Evercore ISI head of internet research, said in a recent program on CNBC Alphabet Inc (NASDAQ:GOOG) is a bet for investors who want “real alpha” in their portfolios. The analyst believes Alphabet Inc (NASDAQ:GOOG) stock could see a change of sentiment if investor concerns about AI search and antitrust challenges are cleared:

“I don’t think the worst-case scenario is going to come to pass. The worst-case scenario would be a forced sale of Chrome and then a banning on all search distribution payments. I don’t think that’s going to happen. If it doesn’t happen, I think you’ve got a clearing event for Google shares. And then what Google needs to do is prove that they can monetize AI searches, GenAI searches, AI overview searches, just as well as they can traditional searches. They’ve been saying that publicly, but they’ve got to kind of show it in the numbers. How do you do that? You maintain this kind of 11 to 15% search revenue growth that they’ve done for the last two years. You keep that up at the same pace, Scott, and I think the bears are going to kind of lose steam and you get a real chance for a rerating.”

Analyst Explains Why Alphabet (GOOG) is the ‘Real Alpha’ for Portfolios

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The market remains reluctant about the stock amid threats to its search business due to the onslaught of AI tools like ChatGPT. However, Alphabet Inc. (NASDAQ:GOOG) bulls believe these concerns are overstated.

Google has an edge over competitors because it’s easier for the billions of users of its search engine to switch to Gemini instead of opting for a completely new model. Google has over 1.5 billion monthly users interacting with its AI-powered Search overviews. OpenAI, Alphabet’s biggest competitor now when it comes to AI search, has less than 5% of its users paying, and its business model is still developing.  Google’s first-quarter results showed continued strength in its cloud unit, with revenue up 28% year over year and solid operating income growth. This supports Google’s broader AI strategy and underscores the scale advantages of its cloud business.

Fidelity Dividend Growth Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q1 2025 investor letter:

“An outsized stake in Alphabet Inc. (NASDAQ:GOOG) detracted as well. The shares returned-18% for the quarter, falling beginning in early February, as the advertising giant and parent of the Google search engine announced quarterly revenue that reflected a slowdown in sales at its cloud-computing and device businesses. Investors were hoping strength in cloud computing would ease the impact of recent weakness in the company’s core advertising business. Meanwhile, management said it is meaningfully accelerating investments in data centers that power artificial intelligence. Alphabet also faces regulatory pressure, including a recently opened antitrust probe from the Chinese government.”

While we acknowledge the risk and potential of GOOG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GOOG and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.