End Of Googles Dominance? Stock Gets Rare Analyst Downgrade Over AI Fears – Forbes

Updated May 15, 2023, 04:03pm EDT

Loop Capital downgraded its stock rating for Google parent Alphabet from a buy to a hold in a buzzy Monday morning note to clients, throwing some cold water on last weeks boundless optimism for the Google parents future in the budding artificial intelligence sphere.

The boom in AI chatbots could cause "behavioral changes" that make users less likely to rely on traditional search engines, placing a "ceiling" on Alphabet's valuation, Loop Capital analysts Rob Sanderson and Alan Gould wrote in a Monday note.

The strategists set a $118 target for Alphabet shares, a tick above the stocks $117 price Monday and well below the $130 average analyst target for the stock, according to FactSet.

Its the first downgrade for Alphabet since at least March 3, per Factset.

Shares of Alphabet tumbled nearly 1% in Monday trading, moving against the tech-heavy Nasdaqs slight gains, though the stock is still up more than 10% over the past week as investors cheered on the companys Wednesday presentation outlining the incorporation of AI into various phases of its business.

Loops skepticism on Alphabet comes not from concerns about the oft-discussed gains made by Microsoft in the AI space but rather about how generative AI chatbots like Microsoft-backed ChatGPT call into question Googles long-standing status as the primary gateway to the web, calling the shift among users a competitive force against its dominance in connecting users to information.

Even if AI caps Alphabets upside, it remains one of the largest companies on earth, with its $1.4 trillion market capitalization trailing only those of Apple, Microsoft and Saudi Aramco.

Google has unmatched AI competencies and will be a major beneficiary of AI adoption over the long-term, Sanderson and Gould clarified. That echoes the bullish sentiments expressed by many analysts following Googles I/O developer conference; firms such as Bank of America, Goldman Sachs, UBS and JPMorgan reiterated their buy ratings for Alphabet in notes late last week.

Sanderson and Gould published another note early Monday upgrading Metas stock from a hold to a buy, setting a $320 price target for the Facebook and Instagram parent, indicating 37% upside in what would be the stocks highest price since January 2022. Shifting macroeconomic tides and faith in Instagram Reels and Metas AI push in advertising all serve as tailwinds for the stock, according to the strategists. Meta shares rallied more than 2% in Monday trading.

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I'm a New Jersey-based Senior Reporter on our news desk. I graduated in 2021 from Duke University, where I majored in Economics and served as sports editor for The Chronicle, Duke's student newspaper. Send tips at dsaul@forbes.com.

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End Of Googles Dominance? Stock Gets Rare Analyst Downgrade Over AI Fears - Forbes