Google's Stock Faces 25% Plunge Risk if Forced to Divest Chrome in Antitrust Ruling

Alphabet Inc.’s Google faces a potential 25% plunge in its stock price if U.S. Judge Amit Mehta orders the company to divest its Chrome browser or core search assets, according to a warning issued by Barclays analysts. The investment bank described such an outcome as a “black swan” event, signaling an unexpected and severe disruption to the tech giant’s business model. The threat arises from an ongoing antitrust case, where a federal court ruled in August 啐 that Google unlawfully monopolized the search advertising market through anticompetitive practices.

Judge Mehta is expected to rule on remedies for the case by August 2024, including whether Google must sell Chrome—a browser with over 4 billion users—or share search data with rivals. The U.S. Justice Department and state attorneys general argued that Google’s dominance stems from practices such as tying Chrome to its search engine as a default and enforcing exclusive agreements to maintain its market position. Barclays analysts noted that Chrome contributes roughly 35% of Google’s search-related revenue, making its potential divestiture a major blow to the company’s financial health.

Barclays’ report highlighted that while the likelihood of a breakup remains uncertain, the risk has grown since legal arguments concluded last week. Analyst Ross Sandler stated that if Chrome were sold, Alphabet’s shares could drop by 15-25%, with earnings per share facing a potential 30% decline. Sandler emphasized that such an outcome would be unprecedented, as investors have not priced in such a scenario. “This would be a transformative event,” he said, adding that the most plausible buyers of Chrome could be large AI firms like OpenAI or Anthropic, though the outcome remains speculative.

The legal battle has intensified scrutiny over Google’s market power. The case centers on allegations that Google stifled competition by leveraging its dominance in search to control adjacent markets, such as advertising and default browser settings. A ruling requiring structural changes could set a precedent for future antitrust actions against tech giants, potentially reshaping how courts address monopolistic practices in digital ecosystems.

Alphabet has already signaled its intent to appeal any adverse ruling, prolonging legal uncertainty. The company also announced a $500 million settlement to resolve shareholder claims related to antitrust violations, though the broader legal risks remain unresolved. Barclays maintained its “overweight” rating on Alphabet’s stock but cautioned investors to prepare for extreme scenarios. The firm noted that even the threat of a breakup could weigh on investor sentiment, given the unprecedented nature of such a penalty for a major tech firm.

Analysts have historically viewed antitrust cases against Big Tech as reputational risks rather than existential threats. However, the current litigation underscores regulators’ growing willingness to pursue structural remedies, such as asset sales, which could redefine corporate strategies and valuations. For Alphabet, the coming months could determine whether its decades-long dominance in search and advertising endures—or faces a fundamental overhaul.

The case has broader implications for the tech industry’s regulatory landscape. A ruling against Google could embolden regulators to target other platforms accused of monopolistic behavior, from social media to e-commerce. For now, investors await Judge Mehta’s decision with heightened caution, aware that the stakes extend far beyond Alphabet’s bottom line to the future of digital competition itself.