Alphabet could wind up like Eastman Kodak after the digitization of photos if the Google parent fails to successfully integrate artificial intelligence into search, according to Melius Research. Analyst Ben Reitzes warned that Google needs to better incorporate AI into search or risk losing the next generation of search users to ChatGPT. While Google has yet to report impacts to the advertising business from users fleeing for other AI-enabled search options, Reitzes warned that the data can flip quickly. He pointed to Eastman Kodak, which was previous in the Dow Jones Industrial Average , as a worrisome case study. When following the company into the early 2000s, he saw it brush off concerns about the existential threat to the photo business from the digital camera wave. “Despite obvious threats from digital cameras and photo printers, film sales actually picked up into the year 2000 on the back of economic strength. Also, digital technology wasn’t ready right away to cut sales of film – but common sense told us differently,” Reitzes wrote to clients. “At the time, Kodak management told us that film would co-exist with digital cameras and more photos would be taken – and more would need to be printed by Kodak.” Specifically, Reitzes zeroed in on OpenAI’s home page as the “digital camera” to Alphabet’s Kodak in this analogy. Google’s AI summaries sitting atop searches don’t meet the bar set by OpenAi in simplicity, he said. In turn, the analyst warned that advertising revenue could take a hit by the end of 2026. Reitzes has a hold rating on Alphabet — which puts him in the minority on Wall Street, per LSEG. His $173 price target is below the Street’s average, but still suggests upside of about 12.1% over where shares finished last week. The stock ticked lower by 1.7% in Monday trading. Shares have tumbled around 20% this year and just over 25% from its all-time high recorded in February. GOOGL YTD mountain Alphabet in 2025 With investors worried about search, Reitzes called the stock “cheap for a reason.” He cautioned against trying to value the stock as a sum of its parts, given that management isn’t interested in creating value via that route. “We have a $2T market cap that is just drifting – and now data is surfacing that finally portends to upcoming challenges in search,” Reitzes said. “The drift should continue.” Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles, and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
