Under the weight of sweeping antitrust enforcement and intense competition for AI turf, Alphabet stock (GOOG, GOOGL) is enjoying a December resurgence. No Big Tech platform has risen so much this late in the year. And aside from Tesla (TSLA), shares of the Google parent are outshining the rest of the Magnificent Seven, rising 14% this month.
Back-to-back catalysts — from a quantum computing breakthrough to the demise of a chief rival in the robotaxi market — lifted shares in the final weeks of 2024. They punctuated a year defined not so much by transformation but by rediscovery.
“The stock market rewards mystery and open-ended opportunities and Alphabet still has its mojo — the recent announcements were a reminder of that,” said Michael Smith, senior portfolio manager at Allspring Global Investments.
By the numbers, even Google’s 40% year-to-date gains fall below the Magnificent Seven average of about 64%. The company’s stock price growth is well behind the chart-topping appreciation of Nvidia (NVDA), Meta’s (META) powerful comeback story, and Tesla’s post-election Trump bump. But the gap between Google’s share price gain and those of the best-performing tech companies is partly why analysts see buying opportunities.
Google’s end-of-year rally also highlights changing perceptions of the company. Where earlier this year Google was still seen as playing catch-up to Microsoft (MSFT) and OpenAI in the burgeoning market for AI tools, Mountain View has since worked to even the playing field.
“People have been worried about the innovator’s dilemma affecting Google’s commitment to staying on the right side of change,” said Smith. “More recently, it is clear that Google has the capabilities to stay at the front of the industry.”
Google’s AI Overviews, the company’s most public-facing AI offering, represented an overhaul of its core search product. And while questions still remain about how well the company can monetize AI-inflected search without cannibalizing its proven business model, CEO Sundar Pichai has said that AI Overviews has led to increased user engagement.
“If we get more confirmation that AI accelerates search growth, that would represent a major change to consensus thinking and lead to more upside for Google shares,” said Smith.
OpenAI might still have a first-mover advantage in generative AI, said Hanna Howard, a portfolio manager at Gabelli Funds. But maintaining that edge over a longer period is challenging as large-scale, well-capitalized players like Google spend meaningfully to develop their own AI capabilities.
STANFORD, CALIFORNIA – Alphabet CEO Sundar Pichai has touted the early success of AI Overviews, a key avenue for monetizing AI advancements as the Google parent maps its future. (Photo by Justin Sullivan/Getty Images) ·Justin Sullivan via Getty Images
On the heels of General Motors (GM) pulling the plug on its Cruise robotaxi business, a boon to Google’s sister company Waymo, Google released its Gemini 2.0 large language model, offering further improvements.
“After being viewed more as an AI laggard after the last one to two years, Google’s narrative perception is changing,” Howard said.
But it isn’t just AI excitement that has driven the stock higher.
Earlier this month, Google unveiled its latest quantum chip, capable of performing a benchmark computation in under five minutes that would take existing supercomputers 10 septillion years to solve, longer than the age of the universe. Commercial applications of the technology are still a ways off. But as Bank of America analysts Justin Post and Nitin Bansal wrote in a note following the announcement, the chip advancements illustrate that Alphabet remains at the leading edge of tech innovation — key for stock sentiment.
“Over the long term, quantum innovation has the potential to create a significant tech moat for Alphabet,” they said.
Analysts say it’s still too early to tell what impact Google’s quantum computing ambitions will have on its business. But the progress, alongside Waymo’s robotaxi advancements, illustrates to investors that Google is much more than a search company, said Angelo Zino, vice president and senior equity analyst at CFRA Research.
But Google’s branching ambitions have also weighed down the stock. That the company has used its success in search to expand into other domains has attracted intensifying regulatory scrutiny, and most recently from the Justice Department, threats of a corporate breakup.
The market has largely shrugged off immediate concerns of a drastic shakeup. Even an adverse final decision and implementation are years away, and the incoming Trump administration can change the calculus in Big Tech’s favor. The legal uncertainty and wide range of potential outcomes make it hard to overshadow other elements of Google’s upswing.
For now, investors are clinging to a 2024 turnaround story.
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.
