Sundar Pichai, CEO of Alphabet Inc. CEO, at the Google I/O developers conference in Mountain View, California, US, Wednesday, May 10, 2023. David Paul Morris/Bloomberg via Getty Images
Alphabet Inc. He’s back in the game. An artificial intelligence game, that is.
Shares in the Google owner have lagged other megacaps this year on concerns that it is losing ground in the race to deploy AI products. Just starting from him It was announced At its developer conference last week on the latest in AI tools, the stock rose 12 percent, adding $160 billion in market value and erasing the underperformance of peers such as Apple Inc and Microsoft Corp.
“Investors are asking whether Alphabet is a winner or a loser,” said Jason Benowitz, senior portfolio manager at CI Roosevelt. “This puts them more firmly in the winning camp.”
Alphabet continued its best performance on Tuesday, and 13F filings rose 3.3%, showing that Bill Ackman’s Pershing Square was among the firms that bought the stock in the first quarter. Late Monday, the hedge fund announced it had bought more than 10 million shares of Alphabet’s Class A and Class C shares in the first quarter, at a current value of $1.2 billion.
In all the excitement around building AI, Alphabet has missed out on the stellar achievements of many of its tech peers, particularly as the rapid growth of OpenAI’s ChatGPT is seen as threatening its dominance of the search business. So last week advertisement A more chatty search engine, and the company is making its AI-powered chatbot more widely available around the clock.
Morgan Stanley analyst Brian Nowak was among the Wall Street analysts heartened by Google’s presentation after what he called an “AI overhang” in the stock.
If the company can successfully integrate the new AI features into its products that serve hundreds of millions of people, it should “build more trust in AI going forward,” Nowak wrote in a research note after the event.
Even after such a strong rally, Alphabet is not expensive relative to peers. At around 19 times, the stock’s price-to-earnings ratio is the highest in months, but it’s still significantly cheaper than Microsoft and Apple, which trade at 29 and 27 times, respectively.
Of course, there are still many skeptics. Loop Capital analyst Rob Sanderson said lingering concerns about AI could prevent Alphabet’s cheap market cap from expanding much. The analyst cut his rating on the stock to hold from buy on Monday, although he sees the company as a major beneficiary of AI adoption in the long term.
“We don’t see this as a threat to Google’s existence, but this feature will be a competitive force against its dominance in connecting users to information,” he wrote.
The bull run over the past week has pushed the relative strength index above the 70 level, which for some technical analysts indicates that a stock may be going too far too high. The shares were trading up 0.4% on Tuesday, still in overbought territory.
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