Alphabet within striking range of $3 trillion as key risk clears

(Bloomberg/Ryan Vlastelica) — Alphabet Inc. shares are suddenly unshackled after a long-awaited antitrust ruling removed a key risk that’s weighed on the stock for months.

The decision by a US district court judge Tuesday enabled Google’s parent to avoid the most punitive measures sought by regulators, including the sale of its Chrome browser. That sent the stock up nearly 10% over the past two days, putting it within striking distance of a $3 trillion market value. With the case now out of the way, investors are turning their attention back to the potential for gains in Alphabet’s stock, which is the cheapest among the Magnificent Seven despite the recent rally.

“What it does is it clears the runway for additional growth opportunities,” said Neville Javeri, senior fund manager at Allspring Global Investments, referring to the ruling. He sees an “incredible opportunity” in the stock as the decision “sets them up for a growth opportunity that might have been taken away.”

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The ruling caps a strong stretch for Alphabet shares that began after its second-quarter earnings showed demand for artificial intelligence products is lifting sales. At the same time, its AI offerings continue to boost investor confidence in Alphabet’s ability to fend off competition from rivals like OpenAI.

Shares rose 0.3% on Friday.

The stock has gained more than 20% since the July 23 earnings report, vaulting Alphabet into the top third of performers in the Nasdaq 100 Index this year, after months of struggles amid concerns about antitrust risks and fears that AI upstarts could eat away at its Google search business, which accounts for more than half of revenue. As recently as June, Alphabet shares were down more than 10% while the Nasdaq 100 was in positive territory.

Though the debate over AI is unlikely to be settled anytime soon, Wall Street is increasingly confident Alphabet can defend its turf. It debuted AI functions that were widely praised earlier this year, and the latest version of its Pixel phones, which come loaded with AI features, were also well received. Sales of handsets from both Alphabet and Samsung Electronics indicate consumers are willing to switch to devices that use Google’s Android operating system.

Approaching a Milestone

“Given new AI Search features and GOOG’s rapidly scaling Gemini app, we expect Google will maintain its leadership in traditional search,” TD Cowen analyst John Blackledge wrote in a note to clients on Wednesday.

With a market capitalization of $2.82 trillion, Alphabet is roughly 7% shy of the $3 trillion mark, a level that’s only been reached by Apple Inc., Microsoft Corp., and Nvidia Corp.

Closing that gap may not be much of a stretch. Alphabet trades around 21 times estimated earnings, compared with 26 times for the Nasdaq 100, and its revenues are expected to grow 14% this year, outpacing the benchmark.

“The stock still looks attractive, since it has so many high-quality businesses growing at fast rates,” said Liam McGarrity, US investment analyst at Harris Oakmark, which has Alphabet as its largest holding.

Despite the improving sentiment, Alphabet’s momentum could be difficult to sustain in the near term. The stock’s 14-day relative strength index jumped above 83, its highest since 2017 and well above 70, the level where technical traders consider a security overbought. The shares are trading even with average analyst price target, suggesting Wall Street doesn’t see much upside from here.

Investors “understandably are relieved that near-term risks are dissipated,” but “long-term concerns about competitive risks to search will constrain the multiple,” Rosenblatt Securities analyst Barton Crockett wrote in a note to clients Wednesday, reiterating his neutral rating on the stock.

For McGarrity, owning Alphabet comes down to believing in its ability to stay ahead of AI rivals and maintain growth.

“When you consider it is cheaper than the market even though it has industry-leading AI and significant potential in businesses like Google Cloud and Waymo, then it seems like it is trading at a significant discount,” he said.

Tech Chart of the Day

Broadcom Inc. shares rallied on Friday, hitting a record high as the chipmaker is said to be helping OpenAI design and produce an artificial intelligence accelerator from 2026. Separately, the company said that its AI outlook will improve “significantly” in fiscal 2026, helping allay concerns about slowing growth.

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Earnings Due Friday

No major earnings expected

–With assistance from Carmen Reinicke, Subrat Patnaik, David Watkins and Brandon Harden.

(Updates to market open.)

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