Shares of Alphabet (GOOGL) are sinking today as the tech giant’s partnership with AI startup Anthropic may be unwound as part of the Department of Justice’s ongoing antitrust case. Reports from Bloomberg suggest that the DOJ is pushing to ban Google from acquiring, investing in, or collaborating with companies that handle search-related or AI products. This could threaten its $2 billion investment in Anthropic and their collaboration on the Claude AI chatbot.
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Google’s partnership with Anthropic allows the AI startup to use Google Cloud and tensor processing unit chips, which is a key part of their collaboration. While the U.K.’s Competition and Markets Authority recently ruled that Google’s partnership with Anthropic does not warrant investigation, the DOJ’s push for stricter measures could still jeopardize their ties.
“More Punitive than Expected”
The DOJ’s proposal also calls for Google to divest its Chrome browser, which is a huge part of the company’s operations. JPMorgan’s Doug Anmuth weighed in on the DOJ’s proposed remedies in its case against Google Search and called them “very comprehensive” and “more punitive than expected.”
The DOJ wants to block Google from giving incentives to Apple and other distributors, which could push Apple to explore alternatives like Microsoft, OpenAI, or even build its own search engine. While the DOJ’s proposal seems like a worst-case scenario, Anmuth thinks Google’s counterproposal in December will be more reasonable, with the final ruling next summer likely striking a middle ground. JPMorgan is bullish on Alphabet, with an Overweight rating and a $212 target.
Similarly, Stifel doesn’t see a breakup as likely as it thinks it is hard to imagine a buyer that could make it happen. The firm does think that Google will probably get banned from paying for default status on third-party browsers, but the appeals process could drag on for over a year. Stifel also has a Buy rating on Alphabet stock but no specific price target.
Is Google Stock a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Strong Buy consensus rating on GOOGL stock based on 27 Buys, seven Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 21% rally in its share price over the past year, the average GOOGL price target of $207.75 per share implies 24.65% upside potential.