Google (GOOGL.US) escapes the harshest "breakup" penalty in antitrust case! AI search rivals benefit little, multiple investment banks raise target price

According to Jinse Finance APP, U.S. District Judge Amit Mehta has issued a remedial order in the Google (GOOGL.US) antitrust case. According to assessments by several investment banks, this may only bring limited benefits to AI-based competitors in the search engine market.

Google successfully avoided the most severe consequences—had the ruling gone against it, the tech giant might have been forced to divest its flagship Chrome browser or Android operating system. Judge Mehta’s data-sharing measures may provide a moderate boost to generative AI search engine startups such as Perplexity AI, OpenAI’s ChatGPT Search, You.com, Andi, and DuckDuckGo.

CFRA analysts Nick Rodelli and Michael Gordon pointed out in their analysis report: "Judge Mehta’s ruling mainly focuses on data sharing, which was Google’s biggest risk point before the verdict. But we believe Google can finally breathe a sigh of relief, as the scope of sharing required by the ruling is relatively limited... However, these measures are intended—and we believe will—at least marginally support the development of generative AI-based search or search alternatives."

The core points of the data-sharing order include search result synchronization, synthetic queries, and search index data. Search result synchronization requires Google to authorize search results to existing licensees.

"Google’s key victory in search result synchronization is that competitors cannot use these results to train their own systems, nor can they use algorithms (rather than users) to generate 'synthetic' queries," Rodelli emphasized.

Regarding search index data, competitors will be granted "one-time bulk access," including each document’s unique identifier (with duplicate labeling), URL, last crawl time, and spam score.

Google is also required to provide competitors with the Glue and RankEmbed datasets.

"The Glue dataset includes the query itself, user information, the top ten blue links, other feature parameters, click data, hover duration, time spent on the results page, as well as query explanations and suggestions," Rodelli explained. "This constitutes a huge data treasure trove, and an excellent data analysis team (which generative AI companies are bound to have) can use it to optimize the search experience. RankEmbed contains search logs and human rating data, which Google says helps handle long-tail queries."

However, these data-sharing agreements may take years to be implemented—CFRA expects Google to obtain a stay of the remedial order. After that, the case may enter the U.S. Court of Appeals for the District of Columbia Circuit, and may ultimately be decided by the U.S. Supreme Court.

After the ruling was announced on Tuesday, several institutions raised their target price for Google. KeyBanc Capital Markets raised its target price from $230 to $265, maintaining an "overweight" rating. "Although Alphabet has demonstrated stronger product innovation capabilities, its stock price is still below Meta (META) and the S&P 500 index," analysts led by Justin Patterson wrote in the report. "Given that the preliminary remedy is more favorable than expected, we believe Alphabet’s valuation multiple is likely to move closer to the S&P 500, returning to around the five-year median of 21x."

Oppenheimer maintained its "outperform" rating and raised its target price from $235 to $270; Needham reiterated its "buy" rating, raising the target price from $220 to $260. Citigroup maintained its target price at $225.

"Google is likely to appeal, and this process could take years," said Citigroup analyst Ronald Josey. "We reiterate our buy rating on Google, as its Q2 search and cloud business revenue accelerated, and AI and Gemini models continue to launch innovative services."

This ruling is also seen as a victory for Apple (AAPL.US).