How Google proved it “still has its mojo” in 2024

Under the weight of broad antitrust enforcement and intense competition for the AI ​​turf, Alphabet stock (GOOG, GOOGLE) is enjoying a December revival. No other Big Tech platform grew as much at the end of the year. And out of Tesla (TSLA), the shares of the parent Google are outshining the rest of the Magnificent Seven, increasing 14% this month.

Back-to-back catalysts – from a breakthrough in quantum computing to the death of a main rival in the robotaxi market – high actions in the last weeks of 2024. Score a year defined not so much by the transformation but by the rediscovery.

“The stock market prizes mystery and open 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.

According to the numbers, even the 40% of Google’s year-to-date earnings are below the Magnificent Seven average of about 64%. The company’s stock price growth is well behind Nvidia’s chart-topping appreciation (NVDA), Meta (HALF) powerful comeback story, and Tesla’s post-election Trump bump. But the gap between the increase in the price of Google shares and those of the best-performing technology companies is partly because analysts see buying opportunities.

Google’s year-end performance also highlights the changing perception of the company. Where before this year Google was still seen as playing catch-up to Microsoft (MSFT) and OpenAI in the growing market for AI tools, Mountain View has since worked to even the playing field.

“People have been concerned about the innovator’s dilemma affecting Google’s commitment to staying on the right side of change,” Smith said. “More recently, it is clear that Google has the ability to stay at the forefront of the industry.”

Google’s AI Overviews, the company’s most public AI offering, represented a review of its core research product. And while there are still questions about how well the company can monetize AI-infused research without cannibalizing its proven business model, CEO Sundar Pichai said AI Overviews has led to increased user engagement .

“If we get more confirmation that AI is accelerating search growth, that would represent a major shift in consensus thinking and lead to more upside for Google stock,” Smith said.

OpenAI could also have a first-mover advantage in generative AI, said Hanna Howard, portfolio manager at Gabelli Funds. But maintaining that advantage over a longer period is challenging as large-scale, well-capitalized players like Google spend significantly to develop their AI capabilities.

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Hot on the heels of General Motors (GM) pulling the plug on its Cruise robotaxi business, a boon to Google’s sister company Waymo, Google has released its major language model Gemini 2.0, which offers more improvements.

“After being seen more as an AI laggard after the last one to two years, the narrative perception of Google has changed,” Howard said.

But it’s not just AI excitement that has driven the stock higher.

Earlier this month, Google unveiled its latest quantum chip, capable of performing a benchmark calculation in less than five minutes that would take existing supercomputers 10 septillion years to solve, more 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 after the announcement, the chip advancements illustrate that Alphabet remains at the forefront of technological innovation — key to the stock sentiment.

“In the long term, quantum innovation has the potential to create a significant technological moat for Alphabet,” they said.

Analysts say it’s still too early to say what impact Google’s quantum computing ambitions will have on its business. But progress, by the way Waymo’s robotaxi advancesIt 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 on the stock. That the company has used its success in research to expand into other areas has drawn heightened regulatory scrutiny, and most recently from the Department of Justice, threats of a corporate breakup.

Technology pessimism, however, is not Wall Street’s forte.

The market has largely shrugged off the immediate concerns of a drastic defeat. Even an adverse final decision and implementation are years away, and the incoming Trump administration may change the calculus in favor of Big Tech. Legal uncertainty and the wide range of potential outcomes make it difficult to overshadow other elements of Google’s growth.

For now, investors are hanging on to a 2024 turnaround story.

Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.

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