Alphabet-C has been "downgraded" by Wall Street again, this time due to "too fast action in AI!"
Bernstein warns that actively integrating GAI into core search may have an impact on search advertising pricing.
Wall Street's enthusiasm for AI is waning, with Alphabet-C receiving another downgrade on Tuesday and Bernstein warning that rapid AI development could hurt its advertising business.
On Tuesday, Bernstein downgraded Alphabet-C from "outperform" to "market perform" and set a new target price of $125.00.
Bernstein analyst Mark Shmulik pointed out that Alphabet-C's stock price has quickly caught up with its fundamentals:
There is some risk in Alphabet-C's AI development, as it is an emerging technology and Alphabet-C is seen as a major player, along with Microsoft and Nvidia, in driving the rise of US tech stocks this year.
However, Alphabet-C has gone from lagging behind its peers in AI to being ahead of them, and actively integrating GAI into its core search could impact search ad pricing.
On Monday, UBS downgraded Alphabet-C to neutral from buy and warned to be cautious about US tech giants. UBS said that revenue related to AI may need time to optimize, and it is difficult to see upside to single-digit growth expectations for related websites, with the market generally expecting growth to accelerate to 11%.
With the downgrade, Alphabet-C's consensus rating (representing the ratio of buy, hold, and sell ratings) fell to 4.655 (out of 5), the lowest rating since April 2018, compared to a consensus of 4.961 a year ago.
In overnight trading, Alphabet-C fell slightly, dropping more than 3% on Monday, with six of the past seven trading days ending in declines, but Alphabet-C has risen more than 30% so far this year.
Other tech stocks' risk appetite has also cooled, with Apple's consensus rating at its lowest level since November 2020 and Microsoft's rating at its lowest level since mid-2019.
However, Wall Street remains bullish on Alphabet-C, with about 85% of analysts continuing to recommend buying the stock, and even Bernstein remains positive, stating in its report that the stock is "like a warm embrace, and we hope to come back soon."