Alphabet (GOOG) Stock: Wall Street Analysts React to Latest AI Innovations

TLDR:

Table of Contents

Google unveiled new AI features including wider “AI Mode” rollout for US users and premium AI subscription
Analysts are impressed with Google’s AI development despite market concerns about impact on core search business
Wells Fargo maintained Equal Weight rating with $175 price target despite positive AI developments
Apple executive testified that searches in iPhone browsers fell for first time in April, raising concerns
Google claims “AI Overviews” has 1.5 billion monthly users and increases search engine usage frequency

Google announced significant AI innovations at its recent developers conference, but investors responded with caution. The tech giant’s parent company, Alphabet, saw modest premarket trading gains of 0.3% to $164.54 after falling 1.5% the previous day.

The company revealed that its “AI Mode” is exiting beta and will be available to all US users starting immediately. This feature was part of a series of AI announcements that included a premium AI subscription option.

Google also showcased 3-D video calls, real-time language translation, digital assistants, and a new line of smart glasses. These innovations highlight the company’s push to maintain its competitive edge in the AI space.

Google launches AI Mode to US searchers and adds new features https://t.co/QGQ6mHczX9 pic.twitter.com/KSxYz91V0j
— Barry Schwartz (@rustybrick) May 20, 2025

Wall Street analysts expressed optimism about Google’s AI direction. KeyBanc analyst Justin Patterson wrote that the conference “reoriented investors back to first principles” regarding AI success requirements.

Patterson maintains an Overweight rating with a $195 target price on Alphabet stock. This represents a substantial upside from current trading levels.

Market Concerns Linger

Despite analyst enthusiasm, market sentiment remains cautious. Investors worry about how AI might impact Google’s core search business, which generates most of its revenue.

These concerns were heightened earlier this month when an Apple executive testified in a Department of Justice lawsuit. The testimony revealed that searches in iPhone browsers declined for the first time in April.

This unexpected drop raised questions about Google’s search dominance at a time when AI is reshaping how people find information online.

Google has attempted to counter these worries by highlighting the success of its “AI Overviews” feature. The company claims this feature has 1.5 billion monthly users.

More importantly, Google stated that users shown AI summaries subsequently use its search engine more frequently. This suggests AI integration might strengthen rather than weaken its core business.

CFRA Research analyst Angelo Zino believes these enhancements “will resonate with users and attract advertisers through higher quality leads and improved monetization potential.”

Wells Fargo’s Perspective

Wells Fargo maintained its Equal Weight rating on Alphabet stock with a $175 price target. Their analysts recognized the broader rollout of AI Mode as positive but stressed the need for deeper integration within the core search function.

The firm expects Alphabet will embed AI Mode into its core search within the next three to six months. This integration timeline could be crucial for maintaining competitive advantage against rival AI search tools.

Wells Fargo highlighted that Google’s extensive personalized data from YouTube, Maps, Gmail, Calendar, and traditional search could provide an unmatched competitive edge if leveraged properly.

This data advantage could be decisive in the AI agent market, where providing relevant consumer information will be key to success.

The research firm also warned about increasing risks of disintermediation for platforms dependent on search traffic. As AI Mode adoption accelerates, websites relying on search referrals might face significant challenges.

Independent analyst Richard Windsor suggested Google is “about to go through a tricky time as doubters call into question its search business.” He added that share price volatility could create investment opportunities for those willing to take “the other side of the permanently skittish market.”

Alphabet currently trades at $163.98, below what some analysts consider its fair value. Target prices from various analysts range from $160 to $240 per share, reflecting divergent views on the company’s prospects.

With a market capitalization of $2 trillion and revenue growth of 13.07%, Alphabet maintains strong financial positioning to continue investing in AI development.

The coming months will be crucial as Google works to integrate its AI innovations into its core products while addressing market concerns about its search business future.

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