UBS Analyst Downgrades Alphabet Inc.’s Stock over Artificial Intelligence Revolution Concerns

Alphabet Inc.’s stock was slated to plummet as a result of a pessimistic outlook from UBS analyst, Lloyd Walmsley, in light of the looming artificial intelligence revolution. While Alphabet is currently in the lead in the AI industry, there are underlying concerns about its financial stability.

Previously, Microsoft Corp. was believed to be a threat due to their investment in OpenAI and implementation of the technology on Bing, but Walmsley believes Alphabet’s superior product will keep them ahead of the game.

However, Walmsley’s apprehension lies in Google’s impact on its own business. In transitioning for the AI era, there is a fear that potential advertising inventory may be displaced, resulting in Google focusing more on generative AI-powered search results.

As a result, Walmsley has downgraded Alphabet’s stock from buy to neutral, while increasing his price target from $123 to $132. As of this writing, Alphabet’s shares were down 1% in premarket trading after Friday’s session closed at $122.34.

Google’s Search Generative Experience (SGE)

Google has launched a new search platform called Search Generative Experience (SGE), which uses AI to display more text than the traditional Google search platform. This new platform could create disruption to Google’s monetization machine. While Google may figure out monetization of SGE with time, there could be potential ad-revenue risk in the medium term.

If a user’s query is answered by the AI Snapshot, there may no longer be a need to click through to the original website, leading to a loss in traffic. This, in turn, could impact growth in the company’s Sites businesses, which are currently expected to experience high-single-digit growth.

Investments in generative AI could also put pressure on margins, and there are concerns about the cost of implementing GenAI. However, near-term risk has moderated, and Alphabet has increased its capital-expenditure guidance.

Despite these concerns, Alphabet shares have seen a 39% increase in the beginning of 2023, while the S&P 500 has advanced 13%.

Google Sets In-Office Policies

Google has recently established new policies regarding attendance for employees who work in-office. Failure to meet the new standards could potentially impact their performance reviews.

In an effort to create a consistent and productive working environment, Google has set expectations for employees who choose to work on-site. While remote work remains an option for those who prefer it, in-office employees must adhere to the new guidelines.

These policies can affect an employee’s performance review if they are consistently late or absent without a valid reason. With this change, Google hopes to encourage a sense of accountability and responsibility among its staff.

If you’re currently working on-site at Google, be sure to review the new policies and make adjustments as necessary to maintain a positive working relationship with the company.

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