Editor's note: The markets and our offices are closed on Monday, September 7 for the Labor Day holiday. Because of this, we won't publish Altimetry Daily Authority. Please look for your next edition on Tuesday, September 8.
This Search Leader Is Reclaiming Its ThroneBy Joel Litman, chief investment officer, Altimetry
 Larry Page and Sergey Brin built the Google search engine around a simple idea...
To help people find the information they need on the Internet. Google connected them to millions of publishers, retailers, banks, forums, and other websites that could answer their questions. That was 1998. Today, AI has completely changed the search landscape... This technology now summarizes information for almost any topic, using web sources. At first, investors worried that chatbots like ChatGPT could disrupt Google's dominant market share of the search space. However, the tech giant (and AI leader in its own right) has shown its muscle. Google launched its "AI Mode" in March 2025, and it has been a hit... Users are submitting queries that are roughly three times as long as those in traditional searches. And they're spending up to nine more minutes with this AI tool than with the old Google Search tool. Meanwhile, user traffic to finance and retail websites fell nearly 40% between June 2025 and April 2026. Wikipedia's English edition saw page views fall 8% in late 2025 compared with the prior year. All of this means one thing: Google isn't just an information gateway. AI search technology is turning it into an information source. Today, we'll show why AI-driven searches are strengthening Google's grip on user attention just as investors are pricing in a dramatic collapse. Alphabet's early concerns about AI centered around chatbots pulling users away from Google Search...Alphabet has responded by placing its chatbot, Gemini, directly inside its core product – the Google search website. AI Mode lets users formulate longer, more conversational questions than they could in Google Search. And they can receive multiple answers without ever leaving the Google website. That gives the company a chance to improve its search experience and preserve its market position. Longer search sessions do more than just increase the length of user visits...
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Google's business model relies on user attention. The more time users spend inside Google Search and AI Mode, the more opportunities the company has to gather information about them in a controlled ecosystem. Both search tools do generate billions of clicks outside the Google website every week. But traditional Internet search traffic is falling as more users get their information from AI-generated responses. Overall, Alphabet has been extremely profitable for years. (Keep in mind that Alphabet entered the scene in 2015. Google has been around since 1998.) Alphabet's Uniform return on assets ("ROA") exceeded 40% several times in the 2010s. Returns have stabilized around 28%, on average, over the past five years. Yet investors are expecting another steep decline...We can see that through our Embedded Expectations Analysis ("EEA"). The EEA starts by looking at a company's current stock price. From there, we can calculate what the market expects from the company's future cash flows. We then compare that with our own cash-flow projections. In short, it tells us how well a company has to perform in the future to be worth what the market is paying for it today. Alphabet's lowest-ever Uniform ROA was 22%, back in 2020. At the current stock price, the market thinks it will fall back to that level. Take a look...
In other words, investors expect Alphabet to keep spending heavily on AI without translating that into stronger profitability. We think investors are missing the real story – Alphabet's core product is getting progressively stronger. Once again, Google is changing the way we use the Internet...Google used to direct folks to websites to get the answers they needed. Its AI Mode tool is now keeping more of them inside the Google ecosystem. That's giving Alphabet more insight on user patterns, more control over the user experience, and a stronger market position as search habits evolve. Google's AI-powered platform is also forcing other websites to rethink how they reach users (and customers). Simply put, Alphabet is adapting to AI better than investors expected. The market still assumes its profitability will tank over the next four years. Yet Google knows how to keep users engaged, and its core search franchise is thriving. AI is changing the structure of the web. And despite what some investors may think, Alphabet is remaining at the center of it. Regards, Joel Litman
September 4, 2026
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