“Nature hates monopolies and exceptions. The waves of the sea do not more speedily seek a level from their loftiest tossing, than the varieties of condition tend to equalize themselves. There is always some leveling circumstance that puts down the overbearing, the strong, the rich, the fortunate, substantially on the same ground with all others.” ― Ralph Waldo Emerson

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Tuesday evening’s ruling in the U.S. search-engine antitrust case against Alphabet/Google proved to be a shot in the arm for its shareholders that were surely welcomed. Alphabet shares have largely underperformed the Magnificent Seven as a whole since last year, but the removal of at least one longtime Damoclean sword from the company’s future caused GOOGL-1.14%  to surge 9.1% yesterday. The tech-heavy Nasdaq Composite came along for the ride as well, rising 1%. 

The company is undoubtedly pleased that U.S. District Court Judge Amit Mehta did not order the company to be broken up; nor will the company be forced to divest itself of its nearly ubiquitous and strategically important Chrome browser or its Android mobile operating system – two actions sought by the Department of Justice. 

“After two complete trials, this court cannot find that Google’s market dominance is sufficiently attributable to its illegal conduct to justify divestiture,” the judge wrote in his opinion. In other words, he believes that Google search dominates in large part because it really is that good of a product.

The case isn’t just good for Alphabet. It’s good for other Big Tech companies, as it establishes legal precedent that can help guide their respective strategies going forward, especially since efforts to rein in Big Tech have been one of the few issues in which the Biden and Trump administrations agreed upon – the case was brought during the first Trump administration and also aggressively pursued during Biden’s time in the White House. Judge Mehta ruled that the DOJ and the state prosecutors who brought the suit had “overreached in seeking forced divestiture of these key assets.” 

To be clear, Google will no longer be allowed to pay mobile phone makers like Apple to make Google the exclusive search engine on their devices. Still, the judge ruled that deals in which Google pays device makers to preload default apps like its search engine and its Gemini AI chatbot onto their products are still allowed. 

This likely preserves at least part of an important revenue stream for companies like Apple, which in 2024 collected $20 billion from Alphabet in exchange for making Google the default search engine on its Safari desktop and mobile browser. AAPL-0.59%  shares were a big beneficiary of the ruling, too, rising 3.81% yesterday.

Yet the court ruling is also an implicit, if unintentional, warning that there’s another metaphorical sword hanging over Google’s head. Rising AI giants like OpenAI are already widely viewed as rising threats to Google’s search engine business, still the company’s largest source of revenue by far. Mehta signalled agreement with that view: Fresh competition from generative AI poses “a threat to the primacy of traditional internet search,” and thus “changed the course of this case,” he wrote. Basically, Alphabet might have its rivals to thank for saving its cash cow — but only for now. 

AI developers – particularly the smaller ones – aren’t likely to go unrewarded for their inadvertent assistance. Google was ordered to share search index data derived from search-engine queries to “qualified competitors.” Search-index information comprises the database that the search engine consults to return results (webpage links) to queries, and going forward, Google will be required to license such data, including user-click data and query data, to competitors, including AI companies who could use the licensed data to better train their own large-language models (LLMs).

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📧✍️Here’s what a reader commented📧✍️

Question: Have you traveled to Europe this summer, and if so, did the lack of air conditioning prove to be a problem for you?

Answer: We traveled to four countries in Europe last summer and specifically booked Airbnb’s that were air conditioned. But upon arrival, we found that this advertised “air conditioning” was merely some version of a floor fan in a single room. We felt duped, and sweaty.

Catch up with Fundstrat

We continue to have a positive view on equities in September. There is a lot of Fed speak, especially from voting members, but we are playing closest attention to Waller. His view that tariff inflation is transitory mirrors our stance, and he also agrees tariffs are a tax.

Technical

While the near-term uptrend remains intact as of yesterday’s close, there was more volume flowing into declining issues than advancing during yesterday’s trading. Given the choppy range-bound structure of the last few weeks, as shown on hourly charts below, it’s imperative technically for SPX to push back to new highs right away.

Crypto

ETHBTC found support yesterday, suggesting ETH could resume participating alongside BTC and SOL. Friday’s NFP/unemployment report and potential S&P 500 inclusion for Strategy are the key near-term checkpoints.

News We’re Following

Breaking News

• Nvidia’s venture arm invests in Honeywell’s Quantinuum BBG 

Markets and economy

• Nasdaq’s listing plans will make it harder for small Chinese companies to go public in the U.S. CNBC 
• China services PMI expands at fastest pace in over a year WSJ 
• European parliamentarians attack EU-US trade deal and demand changes FT 

Business

• Hitachi to invest $1 billion to produce power grid components in US REU 
• Apple plans AI-powered web search tool for Siri to rival OpenAI, perplexity BBG 
• US judge questions DOJ decision to drop Boeing independent monitor REU
• American Eagle shares jump 25% after retailer touts ‘success’ of Sydney Sweeney’s denim campaign FXB

Politics

• Florida plans to become first state to ban all vaccine requirements BBC 
• Trump administration’s cuts to Harvard funding are unconstitutional, judge rules WSJ
• Appeals court blocks Trump deportations under Alien Enemies Act AX 

Overseas

• At least 17 killed after Lisbon’s iconic Gloria funicular derails SKY
• Kim Jong Un’s daughter visits China, sparking speculation about succession WSJ 

Of Interest 

• Putin, Xi caught on hot mic discussing organ transplants and immortality HILL