Alphabet Inc (NASDAQ: GOOGL) has done fairly well since the start of this year but a Loop Capital analyst recommends that investor move with caution from here on out.
AI mania could be a headwind for Google stock
Rob Sanderson downgraded the tech stock to “hold” this morning as he doesn’t see it a given that Google will maintain its dominance through the ongoing craze around artificial intelligence.
It’s noteworthy that the multinational made a series of AI focused announcements last week. Still, the analyst said in his research note:
We consider search competition from Microsoft a lesser threat than risk of displacement from behavioural change as users interact more with AI assistants to find information.
His $125 price objective on Google stock still represents about a 7.0% upside from here, though.
Google should focus more on cutting costs
Earlier this year, the tech behemoth announced plans of lowering its headcount by a whopping 12,000 to cut costs.
But Sanderson sees a need for more considering its expense per employee is still the highest among the big four tech companies. On the AI front, the analyst also said:
We disagree with management’s characterization that AI proliferation is similar to transition to mobile. Long-term structural uncertainties surrounding AI will keep investors nervous as landscape evolves and put a ceiling on valuation.
Nonetheless, Alphabet reported market-beating results for its first financial quarter last month as Invezz reported here. Versus the start of 2023, Google stock is up close to 30% at writing.