(Reuters) – Alphabet rallied nearly 7% on Wednesday on signs its dominant Google Search business was faring well in an uncertain advertising market and remained unscathed in the face of competition from an AI-powered Microsoft Bing.
The world’s fourth most valuable firm was set add more than $100 billion to its market capitalization, based on premarket movements. Its shares have rallied 39% this year on the hype around artificial intelligence.
Wall Street analysts said the company’s better-than-expected quarterly earnings showed the strong position of Google Search even as advertisers remain cautious, steady growth in the cloud business and that Google was well placed to compete with Microsoft in AI.
“Don’t call it an AI comeback,” said analysts at Jefferies, adding that Google has been AI-first company seven years.
Jefferies was among the 16 brokerages that raised their price targets, with several of them saying AI had started to contribute to Google’s cloud revenue and helped drive a 28% growth in the quarter that widely surpassed expectations.
Alphabet has rolled out a series of AI products this year and revamped its search engine with the technology as it competes with Microsoft in a race to dominate the nascent field.
The maker of Windows also topped expectations on Tuesday, powered by growth in its Azure cloud unit – the part of its business best situated to capitalize on the booming interest in AI.
The median price target on Alphabet now stands at $138, which is nearly 13% higher than the stock’s last close.
The company has a 12-month forward price-to-earnings ratio of 20.51, compared with Microsoft’s 31.11 and the industry median of 15.29.
(Reporting by Aditya Soni; Editing by Saumyadeb Chakrabarty)