BUZZ-Street View: Alphabet's search business growth slows, focus shifts to AI returns

October 29 - ** On Wednesday, Alphabet's GOOGL.O search advertising growth slowed and spending on artificial intelligence increased, overshadowing the surge in cloud business revenues (link), highlighting the rising costs the company faces in advancing its AI strategy.

** The stock plunged 10.3% in pre-market trading.

Awaiting the return on the AI strategy

** D.A. Davidson (maintains “Neutral” rating, target price: $300) pointed out that the significant increase in capital spending and financing needs until 2027 may continue to put short-term pressure on the share price.

** Morgan Stanley (“Overweight”, target price: $375) stated that the execution of AI-based search and new products is more important for the stock’s outlook than monetizing the TPU infrastructure.

** Pivotal Research (“Buy”, target price: $475) noted that as AI agents become more widespread, search business growth may slow further, but the company’s scale, momentum in cloud business, and AI monetization opportunities should help offset pressure on its core advertising business.

** Piper Sandler (“Overweight”, target price: $345) said the market’s concern over declining AI-driven search monetization could continue to weigh until there are clearer signs of stabilization, although the company still sees strong AI user engagement and demand for its cloud business.

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