Despite facing increased scrutiny from the U.S. Department of Justice, Google’s valuation remains attractive, according to Gary Black, managing partner at Future Fund LLC. In a recent post on X (formerly Twitter), Black highlighted Google’s (GOOG, GOOGL) modest price-to-earnings (P/E) ratio for 2024, emphasizing its growth potential. However, he also acknowledged the looming threat from emerging AI-powered competitors like ChatGPT and Copilot.
The Justice Department recently filed a 32-page court document proposing potential remedies to address Google’s dominance in the search market. These remedies include “behavioral and structural remedies” aimed at preventing Google from leveraging its suite of products, such as Chrome, Play Store, and Android, to favor its search business and related products. The DOJ also targets Google’s use of artificial intelligence in search, acknowledging the increasing importance of AI in the industry.
One of the proposed remedies suggests that Google could be forced to provide access to the data it uses to build its search results and AI models. The judge overseeing the case, Amit Mehta, is expected to rule on the remedies by August 2025, following a two-week remedies hearing in April 2025.
Black, however, remains optimistic about Google’s financial outlook, stating, “$GOOG remains relatively inexpensive among growth stocks at a 2024 P/E of 20.7x and 2025 P/E of 18.3x and +15% projected earnings growth between 2024-2029.” He acknowledges the potential threat posed by AI-based language models but believes that while these models may be gaining market share, Google’s search revenue share remains largely unaffected.
The Justice Department’s investigation and the emergence of AI-powered competitors present significant challenges for Google. However, Black’s analysis suggests that Google’s valuation remains attractive, and its growth potential remains intact. The outcome of the legal proceedings and the evolving AI landscape will ultimately determine the future trajectory of Google’s business.
