Alphabet moves very quickly in artificial intelligence, Bernstein warns in the downgrade

Alphabet moves very quickly in artificial intelligence, Bernstein warns in the downgrade

(Bloomberg) – Alphabet Inc. It took another downgrade on Tuesday, as Bernstein became the latest Wall Street firm to walk away from parent company Google.

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Shares fell 1.5% after the market’s outperformance cut. The stock is on track for its sixth negative session in the past seven, though it’s still up more than 30% this year. Analyst Mark Shmulek writes that the stock’s narrative “quickly catches up with the fundamentals,” resulting in a balanced risk profile.

The company also cited risks related to artificial intelligence, an emerging technology in which Alphabet is seen as a major player, which fueled 2023 rises in stocks of major companies such as Microsoft Corp. and Nvidia Corp.

Bernstein writes that Alphabet has gone “from very slow to very fast in AI” and “a strong push to integrate GenAI into basic search results could create an air pocket in the near term for search advertising pricing”.

The downgrade raises Alphabet’s consensus rating — a proxy for the ratio of Buy, Hold and Sell ratings — to 4.655 out of five, the lowest for the stock since April 2018. A year ago, the consensus was at 4.961 out of five.

UBS downgraded Alphabet to neutral on Monday, writing that AI-related revenue “may take time to improve,” and that “it’s hard to see the upside of current high single-digit site growth estimates and collective calls for an acceleration to 11%.”

Alphabet isn’t the only big idea that sees sentiment moderating. The consensus rating of Apple Inc. Microsoft is at its lowest levels since November 2020, while Microsoft is at levels last seen in mid-2019.

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With that said, Wall Street remains mostly bullish on Alphabet, with about 85% of analysts continuing to recommend buying the stock. Even Bernstein was positive, writing that the stock is “more like a warm hug” and “we hope to be back soon.”

(Updates to open the market.)

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