Parent of Google alphabet(GOOGL)’s shift to internet searches using artificial intelligence will slow ad revenue growth, analysts who downgraded GOOGL shares on Monday said.
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And UBS analyst Lloyd Walmsley said Google’s relationship with content publishers will undergo a major shift that could affect Google’s stock.
In addition, Walmsley downgraded GOOGL stock from long to neutral. Shares fell 3.3% to close at 118.34 on the stock market today.
“Our concern is that SGE[AI-based generative search]will take up valuable ad space and reduce the space where Google can advertise,” Walmsley said in a client note.
GOOGL Stocks: The New Search Competition
Google aims to compete Microsofts (MSFT) investment in artificial intelligence startup OpenAI. At the Google I/O 2023 developer event on May 10, Alphabet showcased the integration of search, maps, workspaces, photos, cloud computing and generative AI into Android devices.
At Google Marketing Live on May 23rd, Alphabet announced more AI tools for advertisers.
“We are aware that Google’s SGE rollout is still in its early stages, and that ad integration is still under consideration,” Walmsley added. “However, in our initial tests against SGE, we found significant changes to SERPs (search engine result pages) compared to old Google. We see it as a potential disruption to the search monetization machine fueled by the Internet.”
Do publishers restrict access to content?
Additionally, GOOGL’s equity analysts noted a shift in relationships with content publishers. He pointed out that Google uses software known as web crawlers to discover publicly available web pages. Also, the crawler sees his web page and follows the links on that page. In addition, we pass data about those web pages back to Google’s servers.
“The traditional reward for publishers to allow Google to crawl their site and include links in search results is free traffic to the publisher’s site,” Walmsley said. “But if his SGE/Bard chatbot at Google is getting less clickouts to the source website and just crawling through publishers just to provide answers, then if the publisher is going to give his Google to content. There is clearly no motive for granting access to
Meanwhile, according to IBD Stock Checkup, Google’s stock has a relative strength rating of 84 out of 99. Additionally, the best strains tend to have an RS rating of 80 or higher.
According to IBD MarketSmith’s chart, GOOGL shares are expanding. It is trading above the buy zone.
Follow Reinhard Klaus on Twitter @reinhardtk_tech See the latest in 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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