Alphabet Stock Outlook: Pounce on GOOG if There’s an Open AI-Driven Sell-Off


  • A possible AI search launch could ding Alphabet (GOOG,GOOGL) stock.
  • This could work to your advantage if the skittish flee from Google and YouTube parent’s shares.
  • If a moderate sell-off occurs, it could be a good entry point for a long-term Alphabet stock position.
Alphabet stock - Alphabet Stock Outlook: Pounce on GOOG if There’s an Open AI-Driven Sell-Off

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Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) has been flying high, but this latest Alphabet stock rally is losing momentum amid fears of a sell-off. Investors worry the company’s advertising moat is diminishing.

The fear, uncertainty, and doubt may scare off skittish investors, but a sell-off could benefit those with a long-term perspective.

Alphabet Stock and the Recent OpenAI News

Over the past year, Alphabet has made significant progress in demonstrating to the market that it is not an “also ran” when it comes to generative AI technology. This AI progress played a role in the company’s strong fiscal performance during the preceding quarter.

However, while increased confidence in Alphabet’s AI catalyst played a role in Alphabet stock continuing to rally after its April 25 quarterly earnings release, as mentioned above, this rally could be fast giving way to a pullback. It all has to do with two recent news items regarding AI technology rising star OpenAI.

First, news that Alphabet lost out to OpenAI for a potentially game-changing mobile AI integration deal with Apple (NASDAQ:AAPL). Second, rumors regarding OpenAI’s plans to unveil a new AI-powered search engine.

OpenAI partnered with Microsoft (NASDAQ:MSFT), which integrated AI into its Bing search engine. Now OpenAI plans to supplant Google in search.

Rumors have had a moderate impact on GOOG’s price and could continue to affect shares. Or worse, all of a sudden have a significant impact.

An Overreaction Could Prove Advantageous

Yes, OpenAI CEO Sam Altman has denied that an unveiling or launch of a search product from the company is imminent. Yet while this may be technically true, there are enough anecdotes out there to suggest that a major update on this could arrive soon.

Now, I’m not saying that if OpenAI unveils an AI search product in the months ahead, this will cause Alphabet stock to sink toward its 52-week low. It may, however, drive a moderate pullback. For instance, a move back down to between $125 and $150 per share.

This would have course be a frustrating turn of events, especially if you bought into GOOG right after the earnings release. However, if you’re a long-term GOOG shareholder, or if you’ve been sitting on the sidelines, this could be a great opportunity.

Why? Shares are more than reasonably priced at 22.5 times forward earnings. Even a moderate pullback would push shares down to a valuation not too far, if not in, value stock territory. Better yet, such an overreaction could prove short-lived.

In fact, all it may take is another quarter of strong growth to quell “end of Google” fears, and to send shares surging higher once again.

The Verdict: Pounce on Any Weakness That Arises

OpenAI may be an AI first-mover, but it hasn’t been unstoppable in market disruption. After all, a Chat GPT-infused Bing may have beaten Google to the punch, the impact of this on market share has been far less than originally expected. I wouldn’t be writing the obituary for Google search just yet.

You don’t have to wait for the OpenAI search rumors to prove true or not to enter a position. As we have argued recently, even at current prices, it’s well worthwhile to enter a buy-and-hold position.

However, if Sam Altman is giving evasive answers, and OpenAI is gearing up for an AI search launch, don’t dread it, look forward to it. It may just well prove to be the next great opportunity to increase exposure to Alphabet stock on the cheap.

Alphabet stock earns an A rating in Portfolio Grader.

On the date of publication, Louis Navellier had a long position in MSFT. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

On the date of publication, the InvestorPlace Research Staff member primarily responsible for this article did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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