Alphabet (GOOGL, GOOG) investors would be better off breaking up most or all of Google’s business as it struggles to prove that its search engine can maintain dominance in the AI chatbot era, DA Davidson analyst Gil Luria told Yahoo Finance in an interview Tuesday.

“ By not breaking up, the company management is dooming Google to trade at … an extraordinarily low earnings multiple for a growth company,” Luria said.

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Last August, US District Judge Amit Mehta found Google liable for illegally monopolizing the general search engine market and the market for general search engine text, Yahoo Finance's Alexis Keenan reported. Mehta is now tasked with weighing fixes for the monopoly — while also balancing advances in artificial intelligence that are forcing an evolution of the traditional online search market, Keenan wrote.

The Department of Justice has asked Mehta to force Google to sell off Chrome and divest its ad network, as well as possibly its mobile Android business.

Luria said his clients — a broad range of institutional investors — want Google to undergo a “big bang breakup” rather than "isolated spinoffs" like the DOJ has suggested. He thinks Google should spin off each of its businesses into separately traded entities.

“ Everybody knows that the best thing for Google is to break it up, except for Google,” he said.

According to Luria’s analysis, which used company earnings reports from Alphabet and rivals, Google’s individual businesses would be valued much more highly as separate entities.

Whereas Google’s market capitalization is below $2 trillion, Luria said in a note to investors Monday that the lump sum of Google’s businesses, when valued separately, would be $3.7 trillion.

Luria said Google should break up YouTube, Search, Google Cloud, Waymo, and its AI segments.

That’s because Alphabet stock is trading at a historically low multiple of 16 times its forward earnings (over the next 12 months) — " well below market multiple," he said.

Luria said Google's businesses would each individually trade at comparable levels to their peers — with Waymo comparable to Uber (UBER), Google Cloud to Snowflake (SNOW), YouTube to Netflix (NFLX), and Google’s TPU business to Nvidia (NVDA).

For example, he estimated that Google’s AI businesses, its chip segment, and Google DeepMind would together be worth $760 billion. Google makes custom chips called TPUs, or tensor processing units, for itself that its customers can use to power their cloud services.

“ The stock could be worth anywhere between $240 and $300 if they proceeded in this path,” Luria told Yahoo Finance. Alphabet shares were trading around $160 on Tuesday.

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Luria argued that Alphabet management should prioritize investors: "Their job isn't to maximize profit. Their job is to maximize shareholder value."

While Luria said Google Search as an individual business would likely trade at 4.6 times its 2024 revenue, he thinks its TPU and DeepMind businesses would trade at roughly 23 times those segments’ 2024 revenue.The Google logo is seen on the Google house at CES 2024. REUTERS/Steve Marcus/File Photo·Reuters / Reuters

Luria said Google Search is “ a melting ice cube.”

”For the last couple of years, there's been a debate about whether Google Search is doomed or not, whether Google can transfer its Search monopoly into an AI chat monopoly, and therefore sustain Google's growth in Search.”

“ It's now clear that we're at the beginning of the end for Google search,” Luria said, pointing to commentary during Alphabet's antitrust trial from Apple's (AAPL) senior vice president of services, Eddy Cue, who said searches declined on its web browser Safari (which uses Google Search as its default search engine) for the first time last month. Cue also revealed that Apple is exploring adding AI search engines such as Perplexity to its default Safari web browser.

Some argue Apple testified that it saw a drop in Safari searches in order to present Google Search as a threatened business in the hopes of preserving its $20 billion deal with the company. Apple’s statements don’t necessarily mean Google is losing ground to competitors, Yahoo Finance's Dan Howley reported.

Either way, there's a big barrier to Luria's suggestion.

He said activist investors couldn't force a change at Google because it "isn't a type of company that an activist could get involved in because insiders have controlling stakes."

"Only founders [Sergey] Brin and Larry Page can save shareholders," Luria said in his note to investors Monday.

Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at [email protected].

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