Alphabet (NASDAQ:GOOG,GOOGL) shares have recently hit new all-time highs. Despite bullish market sentiment, concerns arise about the future of Alphabet stock.
Bullishness is heating up, but so too is the competition. Not only could this affect the extent to which this company can capitalize on the generative artificial intelligence growth trend.
Gen AI-powered offers from rivals may also pose a long-term threat to Alphabet’s legacy business and cash cow: its Google Search segment.
With this in mind, is it time to sell into strength if you own GOOG, stay away if you currently do not hold a position?
Or, should you let existing positions ride, entering one if you’ve yet to buy? Let’s take a closer look and find out.
Alphabet Stock is Rising, but So is the Competition
Since Alphabet’s most recent quarterly earnings release on April 25. GOOG has continued to trend higher.
As discussed in a post-earnings write-up on shares, the latest results and updates to guidance helped to bolster the bull case, for a variety of reasons, not just because of the gen-AI growth trend.
A good example is with Alphabet’s announced introduction of a regular quarterly dividend.
However, more recent moves higher for GOOG stock have been driven primarily by promising developments with the company’s generative AI business.
Yet while AI-related bullishness may be continuing to rise, again that’s not the only thing rising right now.
Alphabet is expanding AI applications and integrating them into existing platforms, while competitors focus on Google’s dominant position in the search engine market.
Alphabet is expanding AI applications and integrating AI into existing platforms, while competitors are doing the same to challenge Google’s dominant position in search engine market.
Mind you, we’re not just talking about big time rivals like Microsoft (NASDAQ:MSFT), or OpenAI, the ChatGPT developer that’s reportedly launching its own search engine.
As Barron’s commentator Jack Hough recently pointed out, it’s possible that other AI search upstarts, like Perplexity.ai, could ultimately give Google a run for its money.
Further Waves of Weakness Could Prove Favorable
The market right now may be confident that Alphabet is now a top AI contender. Thus, investors continue to believe Alphabet stock is a strong way to play this trend.
However, much like how confidence in this company’s AI prospects have wavered in the past, confidence could once again waver, perhaps even sooner than you think.
Yes, AI integration notwithstanding, Microsoft’s Bing search engine has yet to pose a serious threat to Google.
With OpenAI yet to unveil a possible “Google killer,” this competitive risk has fallen back onto the back burner as well. Still, while Bing’s market share hasn’t exploded, it continues to increase at a steady clip.
If or when OpenAI provides its next update on its supposed AI search product, concerns about that rival’s potential to “disrupt” Google could become top of mind once again.
Going forward, we could hear even more about Perplexity’s “Google killer” potential.
But if concerns about competition experience a resurgence, souring sentiment for GOOG, this could work in your favor. Another wave of fear, uncertainty, and doubt could create near-term weakness.
Over a multiyear time frame, buying on these waves of weakness could prove profitable.
The Verdict: No Need to Run
Only time will tell whether Microsoft, OpenAI, or some other AI powerhouse in the making will drain Google’s competitive moat in search.
However, even if such a “worst case scenario” does ultimately play out, other factors could outweigh it.
For instance, further growth of Google Cloud and YouTube may help to counter rising competitive pressure in search. Some of Alphabet’s “Other Bets” could start to pay off in a big way.
Add in other positives, such as the company’s cost efficiency efforts, and there’s much in play signaling that this company will continue to deliver the above-average growth necessary to sustain and grow its valuation.
Hence, until more bearish red flags emerge, there’s no need to run from Alphabet stock. Hold onto existing positions, and feel free to buy on the next “wave of weakness.”
Alphabet stock earns a B rating in Portfolio Grader.
On the date of publication, Louis Navellier had a long position in MSFT. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.