There's a lot of buzz around Google and AI. The current narrative is that Google is falling behind or unable to keep up with its competitors, such as ChatGPT and Perplexity, in the AI race. In this article, I will set up some basic context for readers to understand the whole picture better and then deep-dive into the arguments as to why Google might not be in such deep waters. This will help Google’s stakeholders, like investors, business professionals, developers, analysts, and users, get actionable insights and make more informed decisions. Context First, let's set up some context on the position of Google in the current AI and technology landscape. A few years back, Google was a clear winner in the ongoing AI race. Google has been researching and implementing AI for a long time. But now Google is facing severe headwinds that might cause people to lose confidence in the company and its products. With the rise of startups like ChatGPT and Perplexity, Google’s dominance is in question. Gene Munster, a longtime Google supporter, has turned bearish on Google. Businesses that run advertisements on Google might shy away due to concerns of losing dominance. Also, Google is facing legal issues related to antitrust law for allegedly monopolizing the open-web digital advertising market, meaning Google is asked to divest Google Chrome into a separate company. Let's now deep dive into some arguments that might paint a brighter picture for Google. Gene Munster Google is Innovating in the AI Space The main argument of the threat to Google is its lack of innovation. But Google is not far behind. Google is continuously innovating. Also, Google has a wide moat and a network effect. Any innovations Google makes can be deployed at scale instantaneously. They can turn heavy investments into profits quickly. Let's dive deeply into some of their latest innovations, which they announced during their latest earnings call. a. AI Models Google has rolled out many AI models and agents. Gemini 2.5 is their latest AI model. This model can be integrated into most of their products, thus enabling them to tap nearly 0.5 billion users together. Some other multimodal systems are Vio1 and Imagine3. Other open models exist, such as Gemma3 and other AI agents. Google's VertexAI provides 200+ foundation models. Developers can use these foundation models for their application. But suppose developers shy away from Google, considering it is behind in the race. In that case, they might miss out on excellent models and integration that benefit their use cases specifically. VertexAI b. AI infrastructure & Cybersecurity Google is innovating AI infrastructure with TPUs (Tensor Processing Units) and GPUs. Developers have already been reliant on TensorFlow, which is an open-source platform that is used globally. Developers can now leverage better compute power and more diverse models for their use cases. Google has recently acquired a cybersecurity company called Wiz.  This will substantially help grow their cloud and AI business, which is an integral part of their stack. This leverage will allow users more control over their services. Also, with improved cybersecurity, businesses can trust Google more with their data and products hosted on their cloud. Wiz trust c.Search business with AI Google is continuously increasing its search capabilities. Now, Google provides a comprehensive summary at the beginning of the search results, links, and images. Google is no longer just a blue link website. The results are more visual and interactive. Users using Google search and businesses relying on search for advertisements can significantly benefit from these new advancements. The only drawback is that we cannot chat with the results and have back-and-forth iteratively. That said, I believe Google’s search business is a bit misunderstood. People still rely on Google to shop, book holidays, book hotels, etc. Knowledge-based searches contribute little to Google's revenue compared to advertisement-based searches. This Reddit article explains in detail why the search part of Google is misunderstood. misunderstood Reddit article d.Advertisement with AI AI can be heavily leveraged for its already successful advertisement business. Google has massive amounts of data that can be used to train AI models for targeted advertisements. This is specifically useful for readers who are business professionals. Users can leverage Google advertisements to send more targeted advertisements to users. Social advertisers can also benefit from Google’s DemandGen campaign to capture engagement and action. DemandGen advertisers see 26% more conversions per dollar. Google is continuously improving its advertisement targeting by integrating Gemini across the board. So users can benefit greatly from these. Google is also partnering with Roblox to provide immersive advertisements for Gen Z. DemandGen 26% e. Cloud Products with AI Google Cloud Platform (GCP) is a significant part of Google’s business. Google is rapidly integrating AI into this business. AI tools are embedded across various platforms, such as BigQuery. AI is also integrated into cloud products like Gmail, Docs, Sheets, etc. Businesses can use Google Workspace with added AI features to carry out their business GCP Gmail Docs Google Workspace f. Self-driving enhancements Google has made a significant bet on the self-driving industry. Google has been investing in Waymo for a long time. Waymo is silently  conquering the self-driving sector city by city. Although it doesn't have the scale of Tesla, Waymo is running cars on the ground today. They now have over 250K paid passengers per week. That's a 5x year-over-year growth. Waymo represents a small part of the business, but it's growing rapidly. People in San Francisco can try out Waymo right now. g. Platform and Devices with AI Google is well-diversified and provides platforms like the Play Store, Android, and Google Play, as well as devices like the Pixel Watch and phones. These services stand to benefit greatly from AI. Android developers can significantly benefit from these advancements. Application developers can also use Google AdSense and the Play Store using Grow to increase the reach of their applications. Grow Share Pie is increasing Google’s competitors like ChatGPT and Perplexity are surely eating into Google's market share. They are moving at a rapid pace due to their size and talent. But at the same time, Google is growing rapidly. This seems counterintuitive. What people assume is that the size of the pie is fixed and it's a zero-sum game. But the size of the pie is increasing. Both competitors are benefiting from it at the same time. Here are some reasons this might be happening. a. More peopleare reaching out online.b. Ecosystem lock-ins like Android help Google maintain its dominance.c. People have developed the habit of using Google, so changing that will take longer. Google has its finger on the pulse of its users.d. Google has builttrust & brand over the years. People rely on Google for many things. More people trust & brand Numbers don't lie This part might be particularly beneficial for investors. Google is still a growing company. Even at this scale, Google reports substantial numbers with double-digit growth. The search business remains robust and continues to grow. Google still earns 70 Bn$ in free cash flow per year. Past performance does not warrant future performance. But if LLMs are hurting Google, there must be at least some indicators of this happening. But there are no signs of weakness so far. Their cloud and other businesses are also growing at a massive pace. These are signs of a compounding machine. You can look at Google's revenue growth here. This information might help retail investors make more educated decisions. It's easy to catch a negative sentiment and sell at a loss. Excellent companies that consistently produce results year after year sometimes get discounted heavily due to other reasons or economic fears. Sentiments usually follow the stock price. Historically, when sentiments about companies with the best fundamentals have been negative, it has been a good time to invest. It’s easy to look at things in hindsight, but convincing others of a company’s strong fundamentals during a tough time is very difficult. The same happened with Netflix, and now Netflix is through the roof. investors here loss Sentiments Legal trouble. Although this point may not provide any actionable items for readers, it is an important argument that needs to be included in our overall thesis. This is one of the, if not the most important, points. Google is facing legal issues related to antitrust law for allegedly monopolizing the open-web digital advertising market. Google is asked to divest Google Chrome into a separate company. This sounds contradictory to our core focus that Google will get disrupted by competition. But this is where we are. On one side, we say Google is being disrupted; on the other, the DOJ slaps antitrust on Google. But this is where we are. If this goes through, then Google might face some serious headwinds. However, these cases can last long and are likely to continue. This might affect many businesses that depend on Google Ads. Also, it might be tough for any other company to keep Chrome running for free. Chrome is vertically integrated into the ecosystem, and replicating that is very tough. So, Google might come out on top. antitrust Conclusion. So, many investors who are currently invested in Google or stakeholders who depend on Google’s services and products might shy away from its products or use cases and miss out on opportunities just because of sentiments. There can undoubtedly be disruption, which might negatively impact stakeholders, but the risk is skewed more towards positivity.

Google Might Be Undervalued In The Tech and AI Race

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