Analyst Says Alphabet (GOOG) Trading at 'Huge Discount' - Believes It Can 'Absolutely' Compete with ChatGPT

Ted Thatcher, president of Bright Lake Wealth Management, explained in a recent program on Schwab Network why he is bullish on Alphabet Inc (NASDAQ:GOOG) and mentioned some of the key growth catalysts for the stock:

"At least from a price to earnings ratio, you know, Google's trading around 18 times earnings. If you look at that compared to the other mega caps, it's like at a huge discount. And I understand we've had these concerns about whether Gemini versus Chat GPT usage is competitive or not. But we have to remember, you know, look at Google's revenue. Look at what happened out of their earnings calls. Even their blue link search revenue was up 10%. And then you look at Google more broadly, they have 270 million users, paid subscribers, between their YouTube platform and their Google One platforms. And so when you look at that level of user control that Google has and then you pair that with everything that they just announced at I/O with all these essentially AI apps, some of them authentic, some of them are AI mode with Google Search, you know, I think Google is going to be able to absolutely cram down Gemini through those users' throats, essentially, and absolutely compete with the Chat GPT user growth."

Alphabet posted strong quarterly results, but the market remains reluctant about the stock amid threats to its search business due to the onslaught of AI tools like ChatGPT. However, Alphabet Inc. (NASDAQ:GOOG) bulls believe these concerns are overstated.

Google has an edge over competitors because it’s easier for the billions of users of its search engine to switch to Gemini instead of opting for a completely new model. Google has over 1.5 billion monthly users interacting with its AI-powered Search overviews. OpenAI, Alphabet’s biggest competitor now when it comes to AI search, has less than 5% of its users paying, and its business model is still developing.  Google’s first-quarter results showed continued strength in its cloud unit, with revenue up 28% year over year and solid operating income growth. This supports Google’s broader AI strategy and underscores the scale advantages of its cloud business.

RiverPark Large Growth Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q1 2025 investor letter:

“Alphabet Inc. (NASDAQ:GOOG) shares declined in the first quarter despite solid business fundamentals. Investors reacted negatively to the company’s AI product rollout relative to peers, expressing concern about potential market share loss in core search and cloud segments. Nevertheless, Alphabet continues to deliver strong cash flow from its dominant search and YouTube platforms while investing aggressively in its next-generation AI and cloud infrastructure. Trading at a valuation discount to many of its peers, we view Alphabet as a core holding with compelling upside as monetization of its newer initiatives accelerates.”

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Disclosure: None. This article is originally published at Insider Monkey.