Key Points
Barclays warns that Alphabet (NASDAQ: GOOGL) shares could fall 25% if antitrust litigation forces the company to spin off Chrome, which drives about 30% of its search traffic.
Alphabet faces a second major threat from accelerating adoption of AI-based search tools that bypass traditional Google search, potentially eroding its dominant market share.
A Chrome divestiture combined with AI disruption could not only hurt Alphabet’s fundamentals but also trigger a broader tech sector correction, given its weight in major indices.
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Transcript:
[00:00:04] Doug McIntyre: So Lee, in the last week, we had an analyst talk about alphabet and what they called the Black Swan event. This is what it is.
[00:00:15] Doug McIntyre: The stock will drop 25% if they have to spin out Chrome, which represents 30% of the inbound, traffic to their search. Right. And also is part of the whole ecosystem of paying Apple (NASDAQ: AAPL) for. So this analyst is saying Watch for a 25% reset of Alphabet shares if the court case goes against them and Chrome gets basically spun out as a separate company.
[00:00:50] Lee Jackson: Yeah. And I think it was Barclays that, that made this call. And yeah, that’s a pretty bold, statement to throw out there that it could, take a 25% haircut. But I think he’s right and I think, I think it’s almost. It depends on who you listen to, but a lot of the chatter coming outta Wall Street is, it’s gonna happen.
[00:01:15] Lee Jackson: They’re gonna have to spin off, Chrome. And boy, a 25% haircut from current trading levels would be a lot.
[00:01:24] Doug McIntyre: Oh, it would be horrible. My guess is that you’ve got people building up, short positions about it right now. Now to me, alphabet has, two problems. Let’s just call that problem number one.
[00:01:38] Doug McIntyre: That’s a big problem,
[00:01:38] Lee Jackson: number one. Yeah,
[00:01:41] Doug McIntyre: I think, problem number two is worse. Problem number two is, that I, for example, use chat apps on my phone and my PC to do all my search. In other words, if I’ve got a query, I no longer go to Google. The only thing Google has, as far as I’m concerned right now, that’s superior to AI driven search is a brand.
[00:02:02] Doug McIntyre: I mean, it’s the primary brand in the world. I think it has a 90% global share outside China.
[00:02:10] Lee Jackson: Yeah, it’s ridiculous.
[00:02:12] Doug McIntyre: So, when I, and they have their own Gemini or whatever it is, when you go in and do the search. But look, I know huge numbers of people who just go on.
[00:02:23] Doug McIntyre: And they’re using Musk’s X AI or they’re using open ai, they’re using something that, or they’re
[00:02:30] Lee Jackson: using GR on Twitter. Yeah. Or X. Yeah.
[00:02:33] Doug McIntyre: They’re using those things. So to me, a 25% drop in Google stock, I think is a conservative estimate of what could happen if, Google’s market share starts to erode very quickly, which it could.
[00:02:50] Doug McIntyre: In favor of people Absolutely using these AI apps on phones and PCs. They’re getting Alphabet’s, getting hit twice. They’re getting hit by the Chrome spin out and they’re being hit by AI search. So I don’t like alphabet stock at anywhere close to this level. Not even close. Well,
[00:03:10] Lee Jackson: and they do have, and I’m sure you’ve seen it, you know when you use Google search, their AI comes up immediately.
[00:03:20] Lee Jackson: it’s in the upper left hand corner of the screen. and then you can engage it further, but, Again, they’re all just, it’s really a question of speed and it’s really a question of which AI program can dig deeper, faster, and you can follow it down the line, continuing to ask more questions and things of that nature, which, typical standard search now does not do.
[00:03:45] Lee Jackson: So it, it’ll be interesting to see if, Google is just gonna stay with their AI function that’s within, their search. Yeah. Position or whether they would try to bundle it separately, why they would try that. I don’t, it would seem like it’d be, pulling money outta one one pocket and putting in the other.
[00:04:02] Lee Jackson: So it, it’ll be interesting to see what happens. But I think you’re right Again, this doesn’t even take into account all the issues. they’re still dealing with the EU and other legal issues they’re dealing with. And granted, they have the deep pockets to fund it, but Yeah.
[00:04:19] Lee Jackson: boy, that could, and I’ll tell you, having been on Wall Street for a long time, if you see a major, magnificent seven stock go down 25%, you’ll queue a stock sell off. That will be massive.
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