Alphabet Inc (NASDAQ:GOOG) is on the right track by betting big on artificial intelligence, but it likely won’t see its efforts pay off on the balance sheet until its cost reduction initiatives take hold, according to analysts.
In a note following its 4Q 2022 results, which highlighted slowing revenue and contracting margins, analysts at Canaccord zeroed in on the Big Tech giant’s AI initiatives.
“AI-driven innovation remains at the forefront of Google’s framework for driving sustainable long-term growth in Search, and the company plans to bring more AI-based models and solutions to market in the coming months,” analysts wrote.
READ: Alphabet 4Q results hurt by lower YouTube ad spending, Google Cloud weakness
“AI-based tools like smart bidding are helping to predict future ad conversions and improve bidding performance, and large language models like MUM and BERT are matching ads with queries more efficiently.”
As Alphabet’s cost-reduction initiatives start to pay off in 2024, Canaccord noted that Google’s parent company is leveraging AI to improve productivity and operational efficiency. Canaccord is keeping its Buy rating and $140 price target on GOOG.
Meanwhile, analysts at Oppenheimer noted that Google plans to roll out AI in coming months by leveraging its British subsidiary DeepMind.
The initiatives will focus on large models, new tools and APIs for developers and as enablers for businesses, analysts noted.
“We think Google management is frustrated that OpenAI (ChatGPT) launched first,” Oppenheimer analysts wrote.
That said, Oppenheimer increased its price target on GOOG from $130 to $155. It has an Outperform rating on the stock.
Shares of GOOG had slipped around 1.8% to trade just under US$107 on Friday morning.
Contact Angela at angela@proactiveinvestors.com
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