Jim Lebenthal's inclination is to hold Alphabet Inc. (GOOG) stock despite recent negative news.

Jim Lebenthal, a partner at Cerity Partners, is inclined to hold Alphabet Inc. (GOOG) stock despite the negative news from Apple's disclosure that searches in its devices' internet browsers had fallen for the first time ever last month. Lebenthal believes GOOG's valuation was low before the shares fell 7.5% yesterday and notes that the firm's financial results have remained strong despite competitive threats. The stock rose 17% in the last month but has sunk 29% in the last three months.

Alphabet Inc. (GOOG) stock experienced a significant drop on Wednesday, May 8, 2025, following Apple's disclosure that searches in its devices' internet browsers had fallen for the first time ever last month. The stock plummeted by 7.51%, wiping out approximately $150 billion in market value [1]. This decline was attributed to Apple's exploration of AI-powered search capabilities directly into its Safari browser.

The drop in Alphabet's share price comes amid heightened antitrust scrutiny. Apple executive Eddy Cue revealed during an ongoing antitrust trial that Apple is "actively looking at" reimagining its search strategy. Cue highlighted a notable decline in Safari-based searches for the first time last month, attributing the shift to users increasingly favoring AI tools over traditional search engines [1]. This revelation has raised concerns about the potential disruption of Google's search monopoly.

Despite the recent slump, Alphabet has maintained a strong five-year performance, gaining 120% over the period. The company's core advertising business, particularly from iPhone users, could be significantly impacted by this shift. Google currently pays Apple an estimated $20 billion annually to remain Safari’s default search engine, a figure that reportedly accounts for nearly 36% of Google’s mobile search ad revenue [1].

Jim Lebenthal, a partner at Cerity Partners, remains optimistic about Alphabet's prospects despite the negative news. He believes that GOOG's valuation was low before the shares fell 7.5% yesterday and notes that the firm's financial results have remained strong despite competitive threats. The stock rose 17% in the last month but has sunk 29% in the last three months [2]. Lebenthal's stance is supported by the fact that Alphabet maintains a dominant position in internet search with powerful voice and visual search capabilities that continue to evolve [2].

Google has been aggressively investing in AI development, leveraging its vast data resources and substantial cash reserves. The company launched an "AI mode" on its search page earlier this year to retain users potentially drawn to ChatGPT, and recently expanded its AI-generated summaries to over 100 countries while beginning to place ads in these summaries to bolster revenue [2]. These investments suggest that Google is well-positioned to weather competitive threats while continuing to invest in its AI capabilities.

Alphabet's financial health remains robust, with a profit margin of 30.86%, return on equity of 34.79%, and substantial cash reserves of $95.33 billion. The company's diversified business model—spanning search, cloud computing, YouTube, and various "moonshot" investments—provides multiple avenues for growth beyond its core search business [2].

While the integration of AI search into Safari presents a legitimate threat, Alphabet's strong fundamentals and diverse revenue streams suggest that the company is well-equipped to adapt and thrive in the face of this challenge. Investors should closely monitor the situation as Apple's AI ambitions could significantly reshape the search landscape.

References:
[1] https://liveindia.tv/business/alphabet-stock-plunges-7-loses-150-billion-in-value-as-apple-eyes-ai-search-for-safari/
[2] https://www.investing.com/analysis/alphabet-stock-a-buying-opportunity-after-recent-crash-200660598

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