Shares of tech giant Alphabet (NASDAQ:GOOGL), the parent company of Google, have come under pressure due to the growing criticism of its artificial intelligence (AI) system. Investors fear that the issues with Google’s AI tools could adversely impact user adoption and usage of its Search feature, a key catalyst for the growth of its Search business. GOOGL stock closed 4.44% lower on Monday, February 26.
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Google Search is Alphabet’s largest business segment in terms of revenue. In 2023, Alphabet generated revenue of $175.03 billion from this division. Consequently, any perceived risks to its Search business could negatively impact its overall financials and stock performance.
Google’s Recent AI Problem
Google recently rebranded its chatbot, formerly known as Bard, as Gemini. Further, the company introduced Gemini Advanced, providing users access to its most advanced AI model. Additionally, it launched new apps for Gemini and Gemini Advanced on Android and iOS platforms.
However, controversies arose shortly after the launch. Last week, Google acknowledged issues with Gemini’s image generation feature, leading to a temporary suspension of this functionality. The uproar stemmed from Gemini generating images depicting certain historical white figures as individuals of color. The company has assured users that an enhanced version will be re-released soon.
Is Alphabet a Buy, Hold, or Sell?
Wall Street analysts are upbeat about Alphabet’s prospects despite its recent blunders with AI tools. Alphabet stock has 29 Buy and eight Hold recommendations for a Strong Buy consensus rating.
GOOGL stock is up about 53% in one year. Analysts’ average price target of $164.59 implies 19.64% upside potential from current levels.
