Alphabet’s Review by Jefferies

Alphabet's (NASDAQ:GOOGL) shares have increased by 8% since the beginning of the year, trailing behind its Big Tech counterparts and the overall market.

Jefferies analysts identified three primary concerns affecting Alphabet's performance this year: the potential long-term impact of AI on Alphabet's main search business, leadership and management issues, and the underperforming cloud division.

The emergence of ChatGPT has sparked worries that Alphabet's advertising revenue could be at risk as users might switch from using search engines to chatbots for information queries.

Furthermore, the analysts noted potential margin pressures, especially if user traffic moves from traditional search to Alphabet's generative AI tools, which are more costly in terms of training and inference.

Concerns have also been raised about CEO Sundar Pichai's handling of AI competition and the ongoing search for a new CFO to succeed Ruth Porat, with no updates provided after eight months.

Additionally, Google Cloud's performance remains behind Amazon's AWS in both revenue growth and market share, securing third place after AWS and Microsoft Azure, as highlighted by the Jefferies team.