Alphabet's Google sees steady search traffic despite rising ChatGPT use

Bank of America analysts maintain a 'Buy' rating and $200 price target on Alphabet (GOOG), citing resilient search traffic and increased Google app usage despite rising ChatGPT adoption. May data indicates stable core search performance with flattish month-over-month search traffic globally, though Google's global search share declined marginally to 89.6%; Gemini engagement saw a 25% month-over-month increase, signaling renewed user interest. Analysts believe Google's AI integration strategy and scale advantage position it well to expand search monetization despite competition from AI-native search tools.

Analysis

Bank of America reiterated its 'Buy' rating on Alphabet (GOOG) with a $200 price target, implying approximately 19% upside from its $168 share price, based on resilient May performance amidst the evolving AI-driven search environment. May data revealed flattish month-over-month global search traffic for Google, with daily global web visits steady at 2.7 billion, though this marked a 2% year-over-year decline, consistent with a 2% YoY dip in US visits. Despite a marginal 8 basis point month-over-month decrease in Google's global search share to 89.6%, its core search business remained largely stable, and its US search share notably increased by 22 basis points month-over-month, supported by desktop gains. A key highlight was the 25% month-over-month surge in traffic to Alphabet's AI assistant, Gemini, post-Google I/O, signaling renewed user interest and contributing to a 40% year-over-year increase in usage to 17 million daily visits. Furthermore, a 12% month-over-month growth in Google app users suggests positive reception to Google's strategy of integrating AI features directly into its application. While competitors like ChatGPT continue to experience rapid growth (visits up 3% MoM, app users up 14% MoM), Bank of America emphasized Google's significant scale advantage. The analysts remain optimistic about Alphabet's capacity to expand its search monetization opportunities through deep AI integration, leveraging its extensive data assets and robust monetization infrastructure to better address complex and long-tail queries.

Key Decisions for Investors

• Given Bank of America's maintained 'Buy' rating and $200 price target, investors could consider the potential for approximately 19% upside, aligning with a positive outlook on Alphabet's ability to navigate the AI transition.
• Monitor the adoption trajectory and engagement metrics for Gemini, as its successful integration and monetization are critical to Alphabet's strategy of expanding its addressable market in search.
• Closely observe competitive dynamics, particularly the growth rates of AI-native tools like ChatGPT, alongside Google's global search share and app usage trends, to assess the ongoing impact on its market dominance and user engagement patterns.
• Investors should evaluate Alphabet's ability to leverage its scale, multi-product ecosystem, and AI advancements to sustain growth and monetization, particularly in monetizing previously challenging complex queries, despite slight YoY declines in overall search visits.