Alphabet Focuses on AI to Boost Search Growth: More Upside Ahead?

Core Insights - Alphabet's Search business is significantly benefiting from the integration of AI, maintaining a dominant market share of 90.4% in the search domain [1][9] Group 1: AI Integration and Features - Alphabet has introduced multiple AI-powered features to enhance user engagement in its Search and Discover platforms, including a feature for trending topics and sports updates, currently available in the U.S., South Korea, and India [2][9] - The Circle to Search feature is now active on over 300 million devices, enhancing visual and contextual search capabilities [3] - AI Overviews are reaching more than 2 billion users monthly across 200 countries and 40 languages, driving deeper engagement with advanced reasoning and multimodal responses [3][4] Group 2: User Engagement and Growth - Users are generating queries that are twice as long as traditional searches, indicating increased engagement with the AI Mode, which has over 100 million monthly active users [4][9] - AI Mode in Search is expanding to over 200 countries and territories, with plans to add more than 35 languages [4] Group 3: Competitive Landscape - Microsoft is enhancing Bing's capabilities through AI integration, including the introduction of Copilot Search and Bing Video Creator [5] - Baidu has also launched new AI tools, including an advanced video generation model and an expanded character limit for its search box [6] Group 4: Stock Performance and Valuation - Alphabet's stock has appreciated by 32.9% year-to-date, outperforming the broader Zacks Computer and Technology sector, which returned 22.9% [7][8] - The stock is trading at a forward 12-month price/sales ratio of 8.27X, higher than the sector's 6.88X, indicating a premium valuation [12]