Is Google the Next Kodak? Insights from Alphabet’s Recent Stock Drop

On March 31, 2025, Dow Jones featured an article by Emily Bary that scrutinizes Google’s current standing in the AI landscape and raises compelling questions about its future. Alphabet Inc.’s stock has tumbled by 25% from its peak, prompting analysts to draw parallels between Google’s situation and that of Kodak, a company that struggled to adapt to changing technological paradigms.

Echoes of the Past: Kodak’s Decline

Ben Reitzes, an analyst at Melius Research, presented a thought-provoking comparison in a recent note to clients. He pondered whether Google might be the next Kodak, highlighting how Kodak failed to embrace the digital camera revolution. Despite having some digital offerings, Kodak’s management remained optimistic about sustaining its business model based on traditional film and print demand. This optimism, Bary points out, mirrors some analysts’ perspectives on Google’s confidence in navigating the AI era with its new Gemini initiative.

AI and Emerging User Behavior

The rising popularity of ChatGPT raises critical questions for Google’s search business. Since its emergence 2.5 years ago, ChatGPT has enthralled users, particularly the younger demographic, who have begun to adopt it as their go-to tool for various tasks like writing papers. This shift is alarming for Google, which now faces the reality that its once-unassailable dominance in search could be contested by new entrants into the market.

The “Verb” Status Dilemma

While “Google” has become synonymous with searching the web, ChatGPT has carved out its own niche as a verb among younger users. This generational shift is significant; for many, saying they “ChatGPT’d” their homework is a badge of honor. This trend creates a branding issue for Alphabet’s Gemini, which lacks the same level of cultural integration.

Revenue Challenges Ahead

Reitzes also highlighted the revenue potential for OpenAI, which might reach a staggering $12.7 billion from subscriptions this year alone. In contrast, he is skeptical of Google’s ability to achieve similar financial success with Gemini. He posed a critical question: as OpenAI captures a share of the search ad market, how could at least 20% of the world’s search ad budget, equating to approximately $40 billion, not flow to OpenAI?

A Cautionary Tale for Investors

From an investment viewpoint, the analogy of Kodak offers valuable lessons. Kodak’s stock experienced a significant decline, with its forward price-to-earnings multiple plummeting from 20x to 7x over a three-year period. Once a proud component of the Dow Jones Industrial Average, Kodak now holds a market capitalization of merely about $500 million. This serves as a caution for Alphabet investors, underscoring the importance of adaptability in ever-evolving marketplaces.

Key Takeaways from Reitzes’ Commentary

In light of these insights, Reitzes has maintained a “hold” rating on Alphabet’s stock. He acknowledges the potential for Alphabet to counter these challenges if its cloud-computing business continues to expand. “The bigger this business gets, the more it can offset challenges to search,” he stated, suggesting that Google may still have strategies up its sleeve that could redefine its position in the tech ecosystem.

Conclusion

As Alphabet faces increasing scrutiny and competition from innovative technologies like ChatGPT, the implications for its core search business are profound. Drawing analogies to Kodak’s turbulent history serves as a sober reminder for investors and analysts alike to remain vigilant about the technological innovations that are reshaping industries. Whether Alphabet can navigate these formidable challenges and emerge as a frontrunner in the AI space remains to be seen.

With the stakes higher than ever, the coming years will be pivotal for Google. The question is not just whether it can keep pace with competitors, but whether it can redefine itself in an era where AI is becoming the fabric of everyday life.