Alphabet stock gains as AI innovations boost investor confidence

Investing.com -- Alphabet Inc Class A (NASDAQ: GOOGL)'s shares have surged recently, outperforming the S&P 500 and Meta Platforms (NASDAQ: META), as new AI developments fuel investor optimism, BofA Securities said. Shares of Google parent have surged nearly 9% since Dec. 9.

The brokerage cited recent launches like Google’s AI video generator Veo 2, Gemini 2.0, and the Willow quantum computing chip as key drivers of optimism, reaffirming the company’s leadership in AI technology.

Statcounter data showed a slight rise in Google’s global search share, aided by broader adoption of AI Overviews, signaling potential AI-driven growth in 2024, BofA added.

Google’s Veo 2, trained on YouTube data, is reportedly outperforming OpenAI’s Sora in prompt adherence and physics modeling, with unique features like 4K resolution and extended video durations. This innovation is driving adoption among small and medium-sized advertisers on YouTube, supporting growth into 2025, the note said.

BofA also pointed to the possibility of cost-cutting measures under Alphabet's new CFO in 2025 and highlighted regulatory developments as a near-term catalyst.

Google is expected to respond to a DOJ monopoly ruling with proposed remedies, which could include changes to default placement agreements and a choice screen for Chrome users. However, final decisions may not come until 2027 due to ongoing appeals.

BofA reiterated a "buy" rating on Alphabet, citing underestimated AI upside and future opportunities in search, cloud, and advertising.

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