GOOGL - Google: The AI Bears Are Wrong

2024-06-30 01:07:45 ET

Summary

• Google stock has been getting downgraded due to "AI transition risks."
• In particular, some analysts think that the company's new AI Overviews will reduce Search revenue.
• Google Cloud is one of the most obvious businesses for monetizing AI, as it creates an opportunity to "rent" AI servers to clients.
• Google has moats in search, long-form video and smartphone operating systems.
• The stock is worth the investment in a discounted cash flow model, assuming only moderate levels of growth.

Alphabet Inc ( GOOG ) (GOOGL) (GOOG:CA) has been getting bearish coverage from analysts due to its perceived weakness in generative artificial intelligence (“AI”). Most recently, Rosenblatt analyst Bruce Crockett downgraded the stock due to the “ transitionally negative ” revenue impact of AI overviews. Shortly before that, downgrades were observed at Wedbush , Seeking Alpha Quant , and elsewhere. In addition to the “transitionally negative revenue impact,” Crockett also touched on search share loss to Microsoft's ( MSFT ) Bing, and advertising share loss to retail media networks....

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