Amid a report that Alphabet, the parent company of Google (GOOGL), is considering options to monetize its new artificial intelligence-driven internet search functionalities, a Bank of America analyst suggests that investors should carefully evaluate the potential benefits and drawbacks of this initiative. Google’s stock experienced a decline following a report by the Financial Times.
As per the report, Google may introduce specific AI-powered search capabilities to its premium subscription service, which currently provides access to the Gemini AI assistant within Gmail and Docs. The core Google search engine will remain free for users, with advertisements continuing to be displayed alongside search results, including for subscribers.
Evaluation of Google Stock: AI Opportunities and Risks
A significant point of interest regarding GOOGL stock revolves around the impact of integrating chatbot AI technology into search queries on advertising revenue. Analysts anticipate Alphabet unveiling its revised strategy at the Google I/O 2024 developers event scheduled for May.
On the stock market today, Google’s stock price declined by 1.5% to 152.55, moving out of a buy zone. Year-to-date, Google’s stock has shown a 10% increase in value.
The Financial Times report highlighted that Google has yet to finalize a decision on implementing charges for AI-driven search functionalities.
Justin Post from BofA commented, “The contemplation of charging users for AI-enhanced search features could be attributed to increased expenses related to AI computing or licensing, or a potential decrease in early ad click-through rates for AI-generated search outcomes.” He further noted, “While the monetization of AI-powered search and Gen-AI capabilities is still in its early stages, introducing a premium tier for enhanced features could enable Google to offset some costs without compromising its profit margins.”
Insights from the Google Cloud Computing Conference
Post also mentioned, “From a positive perspective, establishing a paid model for AI services has been viewed favorably by competitors and could prove beneficial for Google by attracting new paid subscribers through innovative AI offerings. Conversely, Google’s contemplation of a subscription-based model implies that AI-driven outcomes might disrupt the existing free search business model.”
Google is set to host its annual cloud computing conference from April 9 to April 11.
GOOGL stock boasts an IBD Relative Strength Rating of 82 out of 99, indicating that it has outperformed 82% of stocks over the past year, according to IBD Stock Checkup. This positions Google as one of the noteworthy AI-focused stocks to monitor.
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