Alphabet Inc Class A (NASDAQ:GOOGL) Outperforms with AI Innovations

Alphabet Inc Class A's shares have surged recently, outperforming the S&P 500 and Meta Platforms (NASDAQ:META), due to new AI developments fueling investor optimism, according to BofA Securities. Shares of Google’s parent company have risen nearly 9% since December 9.

The brokerage noted that recent launches, such as Google’s AI video generator Veo 2, Gemini 2.0, and the Willow quantum computing chip, are key drivers of optimism, reaffirming the company’s leadership in AI technology.

Statcounter data indicated a slight rise in Google’s global search share, supported by broader adoption of AI Overviews, which suggests potential AI-driven growth in 2024, as pointed out by BofA.

Google's Veo 2, trained on YouTube data, reportedly outperforms OpenAI’s Sora in prompt adherence and physics modeling. It offers unique features like 4K resolution and extended video durations, which are driving adoption among small and medium-sized advertisers on YouTube, contributing to growth into 2025.

BofA also highlighted the possibility of cost-cutting measures under Alphabet's new CFO in 2025, and mentioned regulatory developments as a near-term catalyst.

Google is expected to respond to a DOJ monopoly ruling with proposed remedies, which may include changes to default placement agreements and a choice screen for Chrome users, although final decisions could be delayed until 2027 due to ongoing appeals.

BofA reiterated a "buy" rating on Alphabet, citing underestimated AI upside and future opportunities in search, cloud, and advertising.