Alphabet is currently engaged in a battle with AI-powered rivals such as Microsoft’s Bing and ChatGPT and OpenAI’s Perplexity to maintain its status as the top artificial intelligence search engine. Despite rolling out its own AI features, Alphabet’s parent company faces potential risks if it shifts towards traditional search engine technology. Analyst Barton Crockett of Rosenblatt Securities downgraded Alphabet’s rating to Neutral from Buy, citing concerns about transition risks. He also lowered the price target for Alphabet shares from $182 to $181, causing a slight dip in the stock price.
Crockett highlighted risks for Alphabet, including the challenge of placing ads next to AI-generated results, potential loss of market share, and the need for increased capital expenditures to compete with rivals. While Alphabet’s stock has seen significant growth in recent months, there are concerns that revenue may slow down and costs could rise, impacting the company’s performance. Google’s global search share has already decreased from 93% to 91% over the past 10 weeks, with the company expanding its AI-generated summaries which could affect advertising volume.
These risks could impact the market’s outlook on Alphabet’s future performance and valuation, potentially limiting further growth in the company’s multiple or creating uncertainty around earnings estimates. The competitive threat posed by AI has been a concern for Google for some time, with the impact of these technologies now becoming more visible. For any inquiries or additional information, please contact Adam Clark at adam.clark@barrons.com.
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https://www.barrons.com/amp/articles/google-stock-alphabet-ai-search-price-buy-sell-2053c355
