Tuesday's Market Minute: Two Bearish Notes Spell Caution For Alphabet (GOOGL) On A.I. Moves

When Microsoft (MSFT) unleashed its ChatGPT-fused search, market watchers and consumers immediately turned their eyes onto Alphabet GOOGL, the undisputed leader in search, to see its next move. But there’s lately been concern from analysts that as Alphabet ramps up Bard and other generative A.I. products that it’s moved from too slow to too fast in the attractive sector. And analysts feel Alphabet’s new A.I. search could cannibalize its ad revenue, its main source of income.

That’s why Bernstein downgraded the stock to market perform from outperform, but with an unchanged price target of $125 a share, which still represents about a 6% move to the upside from where it closed on Monday. The analyst said that so far Alphabet is up 40% from its November lows, has caught up to the fundamentals and now looks fairly valued with a balanced risk-reward. Yet, while Bernstein remains optimistic on the digital ad spend recovery, the firm notes that there’s increasing competition from other retail media, grabbing for their market share as companies reduce their ad spend.

UBS raised the same concerns on Monday when it downgraded Alphabet to neutral from buy, but boosted the price target to $132 a share. That suggests a 12% increase from Monday’s closing price. Additionally, UBS said it sees near-term monetization risks and a medium-term revenue risk for the company. 

Yet Alphabet is still seeing strong share price action. It’s up more than 32% year-to-date. Traders will help tell the rest of the story as the year marches on.

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