What happened
Shares of Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) were moving higher today, seemingly in response to a report in The Wall Street Journal that the company is planning to add chat functionality to Google Search.
Separately, UBS also reiterated a buy rating on the stock and raised its price target on Alphabet.
As a result, Alphabet stock was up 4% as of 2:42 p.m. ET.
Image source: Getty Images.
So what
In an interview with The Wall Street Journal, Alphabet CEO Sundar Pichai said that the company would add AI chat features to its search engine, confirming what most investors had suspected after the company launched its Bard AI chatbot in response to ChatGPT.
Pichai also rejected the idea that AI chat would threaten his company’s search business, arguing instead that it would expand the opportunity. Microsoft CEO Satya Nadella had contended that margins in search would come down due to AI chat features as they would make computing needs more costly.
Pichai did not address how including chat functionality would impact its advertising business, or say when Google Search would include chat functionality. Bard AI is currently open to a select group of users.
Additionally, UBS reiterated a buy rating on Alphabet and raised its price target from $120 to $123. Analyst Lloyd Walmsley said he expected the company to beat earnings estimates in the first quarter, and forecast earnings per share of $1.21.
Now what
Alphabet stock has bounced back after shares slipped in February when Microsoft said it would integrate ChatGPT functionality into Bing.
However, as a digital advertising business, the company still faces challenges with the threat of a recession as its revenue growth has slowed substantially in recent quarters.
While it should eventually recover, recent data showing a slowdown in the jobs market could indicate a prolonged bear market, which would be a negative for Alphabet.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Microsoft. The Motley Fool has a disclosure policy.
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