The fair value of Alphabet’s stock rose — despite…

We think of Alphabet as a stellar business conglomerate. With solutions ranging from advertising to cloud computing and self-driving cars, Alphabet has become a veritable tech giant, generating tens of billions of dollars in free cash flow annually. While antitrust concerns surrounding Alphabet’s core search business have made headlines, we remain confident in Alphabet’s overall strength and expect the firm to remain at the top of a variety of verticals, including search, artificial intelligence, video and cloud computing.

Alphabet’s core strategy is to keep its advertising business strong, with most of its advertising revenue coming from Google Search. To that end, the firm has invested heavily over the years to improve its search capabilities, ensuring that its search engine remains deeply embedded in the way hundreds of millions of users access information on the web.

We see the company’s investments in AI as a continuation of this effort to protect its core product, Google Search. By using generative AI, Google can not only improve the quality of its own search through features such as AI overviews, but also improve its advertising business by increasing its ability to target customers with relevant ads.

With respect to antitrust, we do not anticipate a material impairment of Google’s search business as a result of government or judicial intervention. While there are a number of possible outcomes depending on the remedial steps imposed on Google, we believe it is likely that Google will maintain its leadership position in text-based search and advertising in the long term.

Morningstar Key Values ​​for Alphabetical Stocks

• Morningstar rating: ★★★★
• Morningstar estimated fair value: $209
• Morningstar Economic Moat Rating: Lat
• Morningstar Uncertainty Rating: Average