Source: PaxForex Premium Analytics Portal, Fundamental Insight
Alphabet's Google search engine is known to dominate the competition. In fact, in 2021, the top search query on Microsoft's Bing search engine was "google.
However, many investors wondered whether Alphabet's reign was coming to an end after Microsoft began introducing new Bing features based on OpenAI technology (the creators of ChatGPT). Is that really the case? Or can Alphabet still maintain its position in the market? Let's look into it.
When Microsoft unveiled its new platform, Alphabet quickly responded by holding its own artificial intelligence (AI) concept event the next day. However, Alphabet's Bard technology made a mistake that caused investors to panic and dump the stock. This caused Alphabet to lose more than $150 billion in market capitalization in just under a week.
But this sell-off is too exaggerated.
Alphabet has been investing in AI technology for years, and CEO Sundar Pichai began sharing his vision for Alphabet as an AI-focused company more than six years ago. Although Alphabet is ahead of Microsoft, it will soon release its AI for use by the general public, allowing further analysis of the tool.
The company has also invested in AI tools for developers, as well as its Google Cloud division, many of which are currently in use.
We are confident in Alphabet's progress in artificial intelligence, even if the company made a slip-up in its presentation. However, Alphabet must do it right, as search is an important part of its finances.
In Q4, Google Search generated $42.6 billion in revenue or 56% of Alphabet's total revenue. Given how important this segment is to Alphabet's financial health, the company's management can't afford to lose this battle for an artificial intelligence-driven search engine.
Investors should not jump off the Alphabet train just because of one event, especially since Alphabet and Microsoft's products are not yet available to the general public. Moreover, OpenAI's ChatGPT product, which kicked off the race to introduce new and improved search engines, is also known for its mistakes, so Alphabet's Bard product is not unique in its missteps.
So is this sale a buying opportunity? After falling so quickly, Alphabet is trading at about 21 times earnings, which is historically low.
Due to economic uncertainty, Alphabet is also facing a difficult advertising environment as companies cut their advertising budgets. If the economy continues to move in a positive direction, Alphabet is likely to see some improvement in its advertising revenue numbers by the end of the year, which could help boost profits.
In addition, Google Cloud had the best quarter among cloud computing providers, so this important segment continues to do well and is close to profitability.
Alphabet's investors should be concerned about the AI rollout, but not to the point of selling. Alphabet should do the right thing, but for investors to declare the war lost after just one presentation is too quick a reaction. Alphabet looks like a great buy after the recent sell-off, but investors should keep an eye on how the AI product will be perceived when it officially launches.
As long as the price is above 92.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 94.47
- Take Profit 1: 100.00
- Take Profit 2: 105.00
Alternative scenario:
If the level of 92.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 92.00
- Take Profit 1: 90.00
- Take Profit 2: 87.00
