Alphabet At August Highs After I/O Event

Alphabet shares jumped last Thursday to highs not seen in 9 months after announcing AI features for Google to compete with Microsoft.

Is ChatGPT Rival, Bard, Enough?

Alphabet's I/O event last week was the occasion to announce that its Google unit would be incorporating AI into its search, over half a year after Microsoft announced its partnership with ChatGPT. Analysts and shareholders were pleased enough with the announcement that shares jumped over 4% and have pushed closer to double digits since, taking YTD gains to 33.19%. Google has had a troubled past when it comes to incorporating AI, and the hope is that those bugs have been ironed out now that Bard is going to be available for a wider audience.

While Microsoft is so far the leader in AI incorporation, at least in terms of reputation, Google has a lot more riding on maintaining search engine dominance. For Microsoft, cloud services represent the bulk of its revenue, and search comes in at less than 6% of the company's sales (less than it makes from LinkedIn alone). For Alphabet, 57% of its revenue comes from search ads, potentially more affected by AI technology, such as servers needed to power AI.

Advertising Model at Risk from AI-VA

Not everyone is happy with what Google has done so far. Analysts at Loop Capital downgraded Alphabet's stock citing uncertainties around the transition to AI. Google has maintained its dominance in the search space through innovation and is now playing catch-up with AI. Some speculate whether the proliferation of AI virtual assistants (VAs) will substantially reduce the number of people using search engines.

Beyond search, AI could shake up the entire online advertising model. Ad revenue constitutes 87% of Alphabet's income. If people obtain information from AI instead of visiting websites hosting AdSense ads, it could threaten other areas of Alphabet's business.

Alphabet Breaks Higher After Triangle Completion

The share price of Alphabet A spiked to $118.50 on Monday due to a triangle breakout that completed down at $104. As long as the stock remains above there, further stands are probable. The first major obstacle for bulls lies at $122.50, followed by $133 and eventually $153 in the longer term. But the whole structure resembles an upwardly biased channel or flag, and under the triangle low, the stock will be exposed to double digits, namely, $96, $88.50 and the low of $83. Only a slide under the last resort could provoke additional short bets.

Key Takeaways

Alphabet's shares reached a 9-month high after announcing the incorporation of AI features into Google to compete with Microsoft. The announcement pleased analysts and shareholders; the stock price increased by 4% and has remained near double-digit gains since. However, not all are happy with the transition to AI, and some believe that it may reduce the number of people using search engines and threaten Alphabet's advertising model. Similarly, while Microsoft leads in AI incorporation, Google has more riding on maintaining search engine domination due to its reliance on advertising revenue.