‘Buy After Google I/O,’ Says Morgan Stanley About Alphabet Stock

Alphabet (NASDAQ:GOOGL) stock has been under pressure in recent times, weighed down by mounting antitrust challenges and growing concerns that AI could erode its search dominance.

But this week’s Google I/O conference helped flip the script. The company unveiled a slate of AI-driven innovations, making it clear it’s not ceding ground – it’s stepping up as a key architect of the AI era.

More than anything, says Morgan Stanley analyst Brian Nowak, I/O showcased “how the company intends to leverage its leading user bases and distribution to drive next generation more personalized ‘search,’ and agentic experiences.”

Among the highlights, CEO Sundar Pichai announced that AI Mode – a conversational chatbot interface for the company’s search engine that debuted in beta earlier this year – is now available to all of Google’s US users. Google will also be enhancing AI Mode throughout 2025 with more agentic, commerce-focused experiences for users.

Soon, users will be able to connect other Google apps, like Gmail, to enable more context-aware responses – such as suggesting events based on travel plans found in emails. Additionally, Deep Search will use Google’s query expansion technology to deliver expert-level, fully cited reports with unique visualizations, beginning with sports and financial data. New agentic features will help users complete tasks like booking tickets or making reservations by navigating websites and filling out forms. Search Live will let users use their phone cameras in real time so Google can assist based on what they’re seeing. Lastly, next-gen shopping tools will offer a dynamic, personalized product browsing experience using Google’s massive catalog, including a new AI-powered “Try-On” feature that shows how clothes might look on the user.

“It will be important to monitor whether these products are rolled out to all users (free vs paid) in order to gauge their potential benefits,” Nowak said on the matter.

Nowak makes the case that for GenAI platforms to drive the next wave of widespread adoption, they’ll need to introduce compelling new features across their free tiers. At the same time, it’s clear that the most advanced capabilities will often be reserved for paid subscriptions. Google delivered on this front, says the analyst, with the launch of Agent Mode in the Gemini app, which allows users to assign and automate multiple tasks – comparable to OpenAI’s Operator functionality.

Google also unveiled Imagen 4 and Veo 3, its newest image and video generation models, both now available. Imagen 4 delivers significantly higher-quality images – up to 10 times faster than Imagen 3 – along with enhanced text rendering and topography capabilities. Meanwhile, Veo 3 builds on the capabilities of Veo 2 by adding audio generation features, including dialogue, background sounds, and sound effects, for more immersive video creation.

“Near-term adoption of these tools may be small (given the required paywall access) but long-term we see how GOOGL’s improving GenAI capabilities can lead to further sources of engagement and monetization for creators and advertisers,” Nowak went on to say.

With that in mind, Nowak is staying bullish on GOOGL shares, assigning an Overweight (i.e., Buy) rating and a $185 price target, implying a ~10% upside from where the stock trades now. (To watch Nowak’s track record, click here)

27 other analysts also take a favorable view of GOOGL’s prospects, while 9 fencesitters can’t detract from a Strong Buy consensus rating. The average price target stands at $197.69, pointing toward one-year returns of 17%. (See GOOGL stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.