Potential Google Breakup: Insights from Analysts

As Google faces antitrust scrutiny from the U.S. Department of Justice (DOJ), discussions around the possibility of a breakup have intensified.

This week, analysts from JPMorgan and Bernstein shared their insights on the DOJ’s initial remedy framework, which was submitted during the ongoing Google Search trial on October 8. The framework, although broad, focuses on four main areas: search distribution, data utilization, AI development, and advertising monetization.

JPMorgan analysts remarked that while the framework was largely anticipated, it carries potential headline risks. They suggested that the DOJ could advocate for structural changes in key components of Google’s operations, such as Chrome, Play, and Android, which may adversely affect the company. Specific proposals, including the prohibition of default search agreements and the requirement to open Google’s API and ranking signals, could disrupt the tech giant’s business model.

While JPMorgan acknowledges the likelihood of structural changes or even proposals for separation, they believe that the framework does not significantly change Google’s stock outlook in the short term.

Similarly, Bernstein analysts characterized the DOJ’s proposed remedies as “a mile wide and an inch deep.” They highlighted that although the remedies are extensive, detailed specifics are scarce, with the conclusive list of remedies set to be revealed on November 20. Bernstein also pointed out the potential negative implications for Google’s AI strategy, as the DOJ’s recommendations may hinder the company’s ability to compete in the rapidly evolving AI market.

“The last thing Google needs right now in the broader AI battle is to contend with regulatory constraints that limit its capabilities,” Bernstein noted.

Both firms agree that the effectiveness of the DOJ’s final proposed remedies will be crucial for Google. While the company’s response has been significant, the situation remains dynamic, with the potential for substantial long-term alterations to its business model.