Alphabet shares surge after dodging antitrust breakup bullet

By Akash Sriram and Rashika Singh

(Reuters) -Alphabet shares jumped about 8% on Wednesday after a U.S. judge ruled against breaking up the Google parent, clearing a major regulatory overhang and putting the tech major on track to add roughly $206  billion to its market value.

The ruling on Tuesday by Judge Amit Mehta allows Google to retain control of its Chrome browser and Android mobile operating system, while barring certain exclusive contracts with device makers and browser developers.

Google was also allowed to keep making payments to partners such as Apple to feature its search engine. Shares of the iPhone maker were up 3.2%.

"This outcome removes a significant legal overhang and signals that the court is willing to pursue pragmatic remedies rather than scorched-earth tactics," said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Alphabet shares, which hit a record intraday high of $230.86, are up nearly 11.7% this year through last close, slightly outperforming the S&P 500 index, but trailing Big Tech peers Meta and Microsoft.

The ruling preserves Alphabet's ability to deepen its partnership with Apple and potentially integrate its Gemini AI into future iPhones, analysts said.

"The payments from Google were a huge revenue generator for the tech giant and the fact these can continue will be a relief in what has been a turbulent year," said Ben Barringer, head of technology research at Quilter Cheviot, an investor in Apple and Alphabet.

Apple was in early talks to use Gemini AI to underpin a revamped Siri voice assistant on its devices, Bloomberg News reported last month.

The U.S. government sued Google in 2020, alleging it illegally maintained a monopoly in search through exclusionary deals with device makers and browser developers.

Alphabet's shares trade at 20.3 times earnings expectations, a discount to other so-called Magnificent Seven stocks and the broader S&P 500 index.

CHALLENGE TO SEARCH DOMINANCE

The Justice Department said the remedies will pry open the market for search services and protect GenAI competition.

Judge Mehta ruled last year that Google violated antitrust laws but declined to order a breakup on Tuesday, citing the rise of AI tools like ChatGPT as emerging competition.

Google must share certain search index and interaction data with competitors, the ruling said, a move that can help AI rivals build and improve competing chatbots and search tools.

Even so, Google's scale and data lead remain formidable, analysts said.

"The order requires data sharing that is limited in scope, in a way we conclude may only marginally boost competition by generative AI services," said Nick Rodelli, legal analyst at CFRA Research's Washington Analysis.

(Reporting by Akash Sriram, Rashika Singh and Akriti Shah in Bengaluru; Editing by Mrigank Dhaniwala and Sriraj Kalluvila)