HSBC starts bullish coverage on Google parent Alphabet

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Analysts at HSBC initiated Google's parent company, Alphabet (NASDAQ:GOOG [https://seekingalpha.com/symbol/GOOG]) (NASDAQ:GOOGL [https://seekingalpha.com/symbol/GOOGL]), with an investment rating of "buy" on Tuesday.

HSBC said it likes Alphabet's full-stack AI strategy through Gemini development, Ironwood chips, and gold-standard datasets, which they expect would benefit growth across Search and Cloud, its two most valuable businesses.

The research firm said Google Search's AI Overviews and AI Mode in the browser powered by Gemini should help the company maintain its ~90% share of the traditional query market.

They, however, acknowledged that the company has lost the in-app frontier model race to ChatGPT, which holds an ~81% market share versus Gemini's ~2%.

On Cloud, HSBC said the generative AI offering should help the company gain more customers through the lock-in effect of new AI processes with Gemini.

They also expect continued subscriber gains within YouTube Music/Premium and a continuation of a sectoral shift to connected TV away from traditional broadcast/cable, in which YouTube is ~50% larger than its nearest U.S. peer.

GOOGL has a PT of $285, implying an upside of 13.8%.

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