Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is one of the mega-cap tech stocks most in focus today. Shares of GOOGL stock are now up 4% higher in afternoon trading on a compelling announcement from the company.
Specifically, the search giant announced that its Google search engine will integrate artificial intelligence (AI) features. The company’s ability to compete with other search engines, such as Microsoft’s (NASDAQ:MSFT) Bing, will depend on the success of this rollout.
Alphabet CEO Sundar Pichai noted that the “opportunity space, if anything, is bigger than before” in an interview with The Wall Street Journal this week.
Let’s dive into what this news means for investors — and why GOOGL stock may still be attractive here.
Growth Investors Continue to Pour Into GOOGL Stock
Google’s dominance in the world of search is notable. Investors in mega-cap tech stocks may have noticed that Alphabet is one of the cheapest stocks relative to its peers, largely due to the mature nature of its core Google search business. Thus, any way the company can increase its durable competitive advantage (or as Warren Buffett would say, its moat) is much-appreciated by investors.
With a near-monopoly on search, Alphabet has benefited from years of advertising revenue growth for this key search engine. Google is simply the means by which most of us search for information. When a company’s product becomes a verb — “just Google it” — its dominance becomes well-known and understood.
Of course, Microsoft’s impressive integration of ChatGPT with its Bing search engine has threatened Google’s search dominance. Thus, this move appears to be necessary for Alphabet, although it may be an integration that’s being taken on sooner than the company hoped.
Alphabet has been a leader in developing AI solutions for other segments of the business, but we don’t really know how this will all play out. While large language models are becoming more widely used, they’re also still in their infancy. Thus, there are some risks with this rollout.
For now, the company believes the risk is worth the reward. Today, it’s clear that investors are cheering on the news and buying more GOOGL stock.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
