Key Points:

• Google faces legal challenges and new AI competition, threatening its search dominance and market cap.
• Justice Department ruling and emerging search engines like Perplexity could erode Google’s revenue.
• We’ll monitor how these developments impact Alphabet over the next year.
• Also: With AI stocks taking a step back, it’s the perfect time to load up on ‘The Next Nvidia’ stocks before they run to new highs

Lee and Doug delve into the broader implications of the recent antitrust lawsuit against Google (NASDAQ: GOOG), suggesting that this might be one of the most significant tech stories in recent years and potentially the next decade. They explain how Google has maintained its dominance by paying companies like Apple (NASDAQ: AAPL) and Mozilla to be the default search engine, which may now be challenged by both the Justice Department and emerging AI-driven search engines like Perplexity. They draw parallels with Elon Musk’s acquisition of Twitter, noting how a commitment to free and open exchange of ideas has made Twitter more popular. They discuss how Google’s reliance on search revenue means any significant loss in market share could severely impact Alphabet’s trillion-dollar market cap. They emphasize the importance of monitoring Perplexity’s growth to see if it gains a loyal user base without buying traffic, which could signal a major shift in the search engine market.

Transcript:

Now, this plays into another story, which may be the biggest tech story of the last five years and maybe the next 10 years.

And that is, is that the Justice Department sued Google, said they were a monopoly.

This past week, a federal judge said the Justice Department’s right.

It’ll get appealed.

There’s no financial consequences as of today.

I think that the problem really wasn’t whether Google got good results.

It’s that it went to people like Apple, gave them tens of billions of dollars to be the default search engine on Safari, their browser.

Same thing with Mozilla.

So what they’ve done is they’ve paid for carriage.

No matter how good or bad their search was, they have, in essence, had enough money to buy traffic.

I think the people who sort of behind the scenes kicked this off was Microsoft because, you know, Bing has had a 3% or 4% share in the United States.

Single digit, for sure.

Yeah, for many, many years.

So Google now could actually get pinched with super high technology coming at it from one direction and the Justice Department coming at it from another direction.

Yep.

And again, I think one of the biggest things that happened in tech in the last two years was Musk stepping in to buy Twitter.

And while he was mocked and he overpaid and this and that, now it’s starting to become the go-to platform.

Why? No censorship.

And again, you certainly don’t want anything that’s vile or vulgar or anything horribly bad on there, but it’s a free and open exchange of ideas.

And I think if an AI search engine had that same platform and that same, you know, goal that Musk has, that could be huge.

Well, the other thing is, is that look, Alphabet is now sort of in the trillion dollar club.

And if you think about Google, there is only, they’re in one business.

I know they have YouTube and they got stuff like, I know they’ve got stuff like Waymo and Google Maps.

But look, it is basically a company that all its money is made and made off Google or the partners where Google’s providing them a search service.

So if you lose any meaningful amount of your revenue from Google search, Alphabet is no longer a trillion dollar market cap stock.

They’re doomed if that happens, because like you said, the ancillary revenue from YouTube, advertising that’s on, you know, Google email and things of that nature, the Gmail, that’s never going to make up for a massive loss in search.

No.

So I think the thing that we want to watch right now, the effects of the lawsuit could be two, three years out, given how long it takes to move things through federal courts.

I do think that since they’re third-party independent measurements of search engine usage, we ought to watch if Perplexity is building its own native audience, not buying carriage, but simply think that it’s good, thinks as good as Google.

And in essence, it becomes sticky, as they call it on the internet.

People start to use it because they think it’s a better product.

Yeah, and that’ll be really interesting.

I think we need to keep an eye on this for the next six months and year because this could pick up speed.

This could really pick up speed.

And if other investors start to go in in a big way, maybe Musk, of course, that could lead to a large change for Alphabet.

Very large.

So we’ll come back once we start to get some solid numbers about how fast it’s growing.

Okay.

Let’s keep an eye on this.

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