Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will contribute positively to its second-quarter earnings, with Alphabet, Google’s parent company, scheduled to release its earnings report on Tuesday.
Following a turbulent week for Nvidia stock, Bank of America and Wedbush have both increased their revenue projections for Google. Justin Post and Nitin Bansal from Bank of America point to the integration of Gemini into Google Cloud and AI Overviews in Google Search as key factors for this surge in sales.
In a research note, the analysts expressed optimism about the expanding role of AI across Google’s platforms, believing that a broader implementation of AI Overviews could enhance user engagement in the core Search business. This comes despite some initial challenges when the tool faced ridicule online for inaccuracies. As a result of these projections, Post and Bansal have adjusted their price target for Google’s stock from $200 to $206.
Google reported a remarkable 60% increase in profits during the first quarter of the year, aided by its AI innovations, which led to a significant climb in its stock price and boosted its market capitalization above $2 trillion, placing it in the same league as Apple, Microsoft, and Nvidia.
The company’s strong performance in the first quarter was driven by the launch of new AI products linked to its Gemini AI offerings. At the recent Google I/O developer conference, Google introduced an advanced AI assistant designed to function with smart glasses. According to Google, its latest Gemini AI model is 20% faster than the most recent version of ChatGPT.
Dan Ives from Wedbush took a more cautious stance on AI Overviews compared to his colleagues but noted that it could benefit Search monetization in the long run. Additionally, he highlighted that AI is already impacting Google Cloud positively, projecting a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth shared a similarly positive perspective, naming Google one of his firm’s top technology stock picks (alongside Uber and Amazon). He expressed optimism about the progress in generative AI as Alphabet approaches its second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that although the current outlook for Google’s AI initiatives appears bright, the long-term implications for sales growth remain uncertain.