Why would the stock price of Google rise against the trend after facing the biggest antitrust case in 20 years?

Wednesday, October 21, 2020, 14:54 GMT

On Tuesday, local time, the US Department of Justice and the state attorneys of 11 states filed an antitrust lawsuit against Google, accusing the technology giant of suppressing competition and illegally maintaining its monopoly on the Internet search and search advertising market. This lawsuit will be the largest antitrust case in the history of the United States.

In response to the above news, Google’s parent company Alphabet’s stock price rose instead of falling. On the Nasdaq Stock Exchange in the United States on Tuesday, Alphabet’s stock price rose by $21.32 to close at $1,55.93, an increase of 1.39%. In after-hours trading that day, Alphabet’s stock price rose by $19.07, to 1575.00 per share, an increase of 1.23%.

The US government’s antitrust lawsuit is undoubtedly a major blow to Google, but why has the stock price of its parent company not been dragged down?

First of all, for investors, this is expected. Many media have previously reported that Google’s search monopoly will be the focus of the US Department of Justice. Some Wall Street analysts have done a lot of analysis and research on this.

Secondly, there are some speculations that any corrective measures that the government will eventually introduce against Google will not have a profound and lasting impact on Google’s ability to make money in the search advertising market. Investment bank Sanford c. Bernstein analyst Mark Schmurrick (Sanford C. Bernstein) told investors on Tuesday that the investment bank believes that Google’s risks in the lawsuit are “limited.”

Finally, Google pays billions of dollars to partners such as Apple every year to ensure the status of its search engine by default. The Justice Department’s lawsuit alleges that users are rarely able to change the default settings, which is actually blocking rival search engines. But the analysis said that due to the market influence of Google’s search engine, even if there are more choices, users may eventually choose Google.

Some critics have been calling for the spin-off of Google to separate the search engine from other Google services, such as YouTube, Maps, advertising technology, Chrome browser and Android operating system.

In addition to the lawsuit filed by the Department of Justice and the attorney generals of these 11 states on Tuesday, some state attorneys are also planning to take further antitrust actions against Google, including lawsuits against the company’s actions in the digital advertising market. In this market, Google controls most of the technology used by advertisers and publishers to buy and sell display ads. In addition, states such as Colorado and Iowa are investigating Google’s search market behavior, and the investigation will end in the next few weeks.