The Ratings Game: This Alphabet bull is feeling more upbeat about Google’s story

by | May 23, 2023 | Stock Market

An Alphabet Inc. bull is feeling more upbeat about the Google parent company’s story given its potential to leverage artificial intelligence throughout its business. Jefferies analyst Brent Thill had a buy rating on the Google parent company’s stock

and increased his price target to $150 from $130 Tuesday, calling it one of the biggest potential beneficiaries of the AI boom.

The new price target “reflects increased confidence in GOOGL’s AI increasing user engagement, enhancing effectiveness of GOOGL ad formats, and driving incremental adoption of Google Cloud” in the long term, Thill wrote in a note to clients. In Thill’s view, the hyperscalers — big cloud-computing companies like Microsoft Corp.
-0.71%, Inc.
and Alphabet — were favored AI plays because they will be able to help other companies train and build AI systems. “Size, scale, and access to high-quality data” will give these companies an advantage, he wrote. See also: Microsoft has ‘pole position’ in the AI race — but maybe not for the reason you’d think Though Microsoft positioned itself as a leader in generative artificial intelligence by investing in ChatGPT creator OpenAI and quickly integrating that technology into the Bing search engine, Google is no slouch and “is already a leader in AI/ML tech,” Thill wrote, referring to machine learning. The AI race isn’t a “zero-sum game,” he noted. “Bing will win searches at the margin, but Google will find new ways to enhance their products.” See more: Alphabet’s stock powers higher as BofA says ChatGPT buzz hasn’t dinged Google Thill doubted Google will get “uprooted” in search, flagging limitations with current chatbots and the high price tag of running AI tools, among other factors. The cost of running a query using an advanced large language model like ChatGPT is perhaps 300 times the cost of running a traditional search inquiry, he wrote. “We believe neither MSFT nor GOOGL will risk severely damaging their current margin structure, and both already have large investments in AI to support experimentation,” Thill continued. Don’t miss: Alphabet heads for milestone not seen in a year as stock proves popular with big funds In the meantime, the company has opportunities to augment its broader business through AI, including by letting marketers create more personalized advertisements. Alphabet shares were off about 0.4% shortly after Tuesday’s open.

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