What’s Happening With Google Stock?

Alphabet stock (NASDAQ: GOOG) jumped nearly 5% in Tuesday’s trading and has remained up over 7% over the past week. While multiple factors likely contributed to the rally, a standout development was the announcement of a breakthrough quantum computing processor called ’Willow.’ Google is hoping that its new chip brings quantum computing, which has long been confined to research labs, a step closer to real-world applications. With insurance stocks being in the news, see What’s Happening With UNH Stock?

Quantum Computing And Google’s Breakthrough

While traditional computers we use today process data in binary, using bits that exist exclusively as either ones or zeros to perform calculations, quantum computers use qubits, which can exist as both one and zero simultaneously. This enables quantum computers to process sizable amounts of data and explore countless potential outcomes at once. However, there is a fundamental challenge in quantum computing space as an increasing number of errors arise as the system grows in complexity with a higher number of qubits. However, Google has achieved a breakthrough that it says can “exponentially” reduce errors as the number of qubits is scaled up. This is a challenge that researchers have been struggling to solve for close to three decades. Google says that its chip performed a computation in under five minutes that would take today’s fastest supercomputers 10 septillion years – that is 1 followed by 25 zeros. This is of course great for Google’s stock – although likely will induce more volatility. Separately, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

How Far Away Are Practical Uses?That said, there appear to be some practical challenges to overcome. Experts believe that the chip’s 105 qubits may still be too few to solve the complex problems quantum computing promises to tackle. Additionally, the chip’s superconducting qubits require extreme cooling, which could potentially present logistical and energy-related challenges. There is also skepticism about the benchmarks and tasks Google may have used to arrive at its comparison with current supercomputers. That being said, solving the error bottleneck is a major step forward and this could mean that the company should be able to eventually build larger quantum computers that can accelerate innovation in various fields ranging from drug discovery to battery design.

The decrease in GOOG stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 65% in 2021, -39% in 2022, and 59% in 2023. In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could GOOG face a similar situation as it did in 2022 and underperform the S&P over the next 12 months – or will it see a recovery?

What This Means For Google StockThe narrative around Alphabet stock has been negative in recent months. Google’s search business is facing significant competition for the first time in years, as AI-powered rivals like ChatGPT and Perplexity introduce highly competitive search products that are gaining traction with power users. On top of this, Google is contending with antitrust cases accusing the company of monopolizing the search market, with potential remedies including a breakup, regulatory oversight, and restrictions on its businesses. The possibility of selling off the Chrome browser, which has over 3 billion users and serves as a gateway to Google’s search engine, has also been raised by regulators.

Now, despite quantum computing likely being a very small and likely non-profitable segment of its business, the breakthrough with Willow serves as a reminder of Alphabet’s broader technological reach. This innovation highlights the company’s deep diversification beyond its core search offering. Alongside quantum computing, there are other highly innovative and fast-growing areas in Google’s empire. Its Waymo robotaxis have a headstart in the U.S. market, with cabs operational in multiple U.S. cities and the business is scaling fast. Waymo does over 150,000 paid rides a week as of October, up from 100,000 the company reported in August. See how Waymo Can Drive Alphabet stock to $500 The cloud business is also rapidly expanding, with Google emerging as the fastest-growing major cloud provider, posting a 35% revenue increase year-over-year in Q3 2024. These advancements suggest that, despite current headwinds, Alphabet is well-positioned to remain a leader in the big tech landscape. We remain neutral on Google stock, with a $182 price estimate which is roughly in line with the current market price. See our analysis of Google Valuation Expensive Or CheapWhile GOOG stock looks like it is appropriately priced, it is helpful to see how Google’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Invest with Trefis Market Beating Portfolios

See all Trefis Price Estimates