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Alphabet (NASDAQ:GOOG) shares have been falling this week after a disappointing promotion for Bard, the company’s artificial intelligence chatbot.. But is this a buying opportunity for me?
I think so. I have been buying shares this week as the price goes down. There are genuine risks with Alphabet stock, but the falling stock price seems like an overreaction to me.
What is the problem?
Alphabet is heavily dependent on Google for its revenue and profit. Google Search represents 56% of total revenue and Google Services is the only profitable segment of the company.
Until recently, this was not a problem. In fact, it was probably a good thing.
Google’s dominant position in the online search market means it was able to generate impressive cash flows. And its low capital requirements allowed Alphabet to maintain strong profit margins.
Recently, however, MicrosoftThe intention to integrate ChatGPT into its own search engine has become a real threat to Google’s position. In response, Alphabet came up with Bard.
However, Alphabet’s demo of its AI chatbot this week was a disaster. Bard reported information about the James Webb telescope that was false.
As a result, Alphabet’s shares fell 12% on fears the company is losing control of the online search market. And since that’s where almost all of his cash comes from, that could be serious.
Should I be worried?
I have Alphabet shares in my portfolio. The wrong rally is a bad thing, but I think the market selloff is an overreaction.
As an Alphabet shareholder, I think I should only be concerned if there is a material threat of Google losing its dominant position in the online search market. I don’t see such a risk, yet.
Bard’s inaccuracy is not impressive. But it’s not obvious to me that ChatGPT is better when it comes to accuracy.
From what I’ve read, the main objection to ChatGPT is that it confidently reports incorrect information. And I’m not sure there’s any way to correct this, for either company.
In my opinion, the threat of inaccurate information is likely to slow the adoption of AI-based search. And that’s good for Google’s current position in the market.
buying the dip
I’m not sold on the prospects for AI-powered search to replace the status quo. However, I will closely monitor the situation. Alphabet’s reliance on Google for its revenue means the implications of its displacement are significant.
Even if I’m right about Google’s search engine maintaining its position, there’s still a risk for me. The idea of the company investing heavily in a cul-de-sac does not excite me.
At the moment though, I think Alphabet stock is too cheap to ignore. That’s why I’ve been buying stocks for my portfolio.
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