Alphabet (GOOGL) stock is trading lower Wednesday after news broke that the U.S. Department of Justice is considering breaking up the company's Google division. The reports follow last week's ruling that found that Google has unlawfully maintained a monopoly in search and text advertising.
"The move would be Washington's first push to dismantle a company for illegal monopolization since unsuccessful efforts to break up Microsoft Corp. two decades ago," stated a Bloomberg report that broke the news, citing people with knowledge of the deliberations. "Less severe options include forcing Google to share more data with competitors and measures to prevent it from gaining an unfair advantage in AI products, said the people, who asked not to be identified discussing private conversations."
The report also said that the government will likely push for a ban on Google's exclusive search arrangements with Android and Apple's (AAPL) smart devices, which were a focus of last week's ruling. It added that a breakup would likely involve the Android Operating System and Google's Chrome web browser, and could include a sale of AdWords, Google's text advertising platform.
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Kent Walker, Alphabet's president of global affairs, said that the company would appeal the August 5 ruling, but Judge Amit Mehta ordered that both sides must begin plans for the second phase of the case. This involves the possible breakup request, according to Bloomberg.
Google gives an AI-powered Android update
Separately, Google on Tuesday announced new artificial intelligence (AI) features for its Android devices.
"We've completely rebuilt the assistant experience with Gemini, so you can speak to it naturally the way you would with another person," said Android Ecosystem President Sameer Samat in a blog post. "It can understand your intent, follow your train of thought and complete complex tasks. By deeply integrating into the operating system, Gemini on Android is even more powerful."
Samat provided examples as to what the new features are capable of.
"Starting today, you can bring up Gemini's overlay on top of the app you're using to ask questions about what's on your screen," he said. "For example, you can find specific information about a YouTube video you're watching. You can also generate images directly from the overlay and drag and drop them into apps like Gmail and Google Messages."
Samat also provided details on Gemini Live, which allows users to chat with Gemini about "whatever's on your mind." Users can ask questions, explore new ideas, or brainstorm jobs based on their skillsets or degrees, he added.
The new features will be available next month on supported Android devices.
Is GOOGL stock a buy, sell or hold?
Alphabet has struggled alongside several of its Magnificent 7 stocks in recent weeks, down more than 14% since mid-July. However, shares remain 22% higher on a year-over-year basis, and Wall Street sees more upside for the communication services stock.
According to S&P Global Market Intelligence, the average analyst target price for GOOGL stock is $204.04, representing implied upside of over 25% to current levels. Additionally, the consensus recommendation is a Buy.
Financial services firm Stifel has a Buy rating on GOOGL stock with a $199 price target.
"Alphabet continues to drive growth at scale through strength in mobile search, YouTube, and programmatic advertising, while investing in other key initiatives (cloud, hardware, AI) that should serve as multi-year growth levers," Stifel analyst Mark Kelley said in an August 8 note.
The analyst adds that the competitive threat narrative is "largely overdone" and that Google's AI capabilities are poised to "maintain an engaged user base." Kelley says that he is bullish on GOOGL stock "given supportive valuation on earnings per share and confidence in the company's long-term growth opportunity."
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