Google's 'full frontal A.I. attack' at developers conference boosts analyst confidence in its long-term dominance

Published Thu, May 11 202311:08 AM EDTUpdated Thu, May 11 202311:15 AM EDT

Artificial intelligence programs coming out of Google's developer event are giving analysts sufficient reassurance in the company's long-term AI dominance. Google on Wednesday unveiled a host of new AI capabilities at its developer conference in Mountain View, California. That included plans to bring generative AI to its mainstream search feature and disband the waitlist for its Bard chatbot. Shares of parent-company Alphabet gained 5% Thursday as the event eased investor concerns that Google may be faltering in the AI war. "AI is reshaping all of GOOGL's products faster than expected, as today should build investor confidence in business durability and AI upside to come," wrote Morgan Stanley analyst Brian Nowak. GOOGL 1D mountain Alphabet shares pop after developer event The event also proved Google is working more quickly than anticipated on many of its AI features. That should boost investor confidence in the company's long-term competitive position in search, productivity apps and the developer ecosystem, he added. "We remain bullish and view I/O as a clearing event that will help erode the heavily debated 'AI overhang'…and narrow GOOGL's current valuation gap vs. peers," Nowak wrote, adding that Alphabet shares currently trade at a 35% discount. Similarly, JPMorgan's Doug Anmuth viewed Google's event as a sign it's "climbing the AI wall of worry," and an indication that it's swiftly working on product innovation and generative AI tools. Google's Bard suffered a series of missteps when the company unveiled the chatbot earlier this year. Even with those concerns, Alphabet shares have outperformed the broader market, up nearly 33% as investors suddenly turned to megacap tech stocks as defensive. Still, many viewed the rollout as a rushed response to ChatGPT. Despite these previous concerns, Anmuth called comments from Google surrounding Bard as "more thoughtful and polished," successfully showing off the tool's full potential. Jefferies' analyst Brent Thill called the event a "full frontal AI attack" and among the "most substantial" conferences from the company in years. He called the company message "coherent," adding that he expects Google to monetize many of these new features before the end of 2023. GOOGL YTD mountain Alphabet shares in 2023 Elsewhere, Bank of America's Justin Post said in a Thursday note that the company's AI search demonstration successfully confronted product, monetization and cost concerns, such as showcasing ways to input retail ads in response to commercial queries. While AI developments in recent months have heightened some concern among investors that Google's dominance in search engines remains in jeopardy , Oppenheimer's James Cordwell said the event signaled that Alphabet is well situated to protect its position. "While there remains uncertainty as to how exactly AI will develop, and some of what Google unveiled was still only a preview of future features, we believe the company provided sufficient reassurance that it remains competitive in AI," Cordwell said. — CNBC's Michael Bloom contributed reporting