Why I’m buying the dip on Alphabet shares

Alphabet (NASDAQ:GOOG) shares have fallen this week after a disappointing promotion for Bard – the company’s AI chatbot. But is this a buying opportunity for me?

I feel – I have bought stocks this week because the price has gone down. There is genuine risk with Alphabet stock, but the drop in share price seems like an overreaction to me.

What is the problem?

Alphabet is heavily dependent on Google for revenue and profits. Google Search accounts for 56% of the total revenue and Google Services is the only profitable part of the company.

So far, this has not been a problem. In fact, that’s probably a good thing.

Google’s dominant position in the online search market means it can generate excellent cash flow. And low capital requirements allow Alphabet to maintain strong profit margins.

But recently, MicrosoftThe intention to integrate ChatGPT into its own search engine has emerged as a real threat to Google’s position. In response, Alphabet came up with Bard.

Alphabet’s demonstration of its AI chatbot this week, though, was a disaster. Bard reports information about the fake James Webb telescope.

As a result, Alphabet shares fell 12% amid concerns that the company will lose ground in the online search market. And because that’s where almost all the cash comes from, it can be serious.

Should I be worried?

I have shares of Alphabet in my portfolio. A blundered demonstration is a bad thing, but I think the market sell-off is an overreaction.

As an Alphabet shareholder, I only have to worry if there is a material threat of Google losing its dominant position in the online search market. I have not seen such a risk.

Bard’s inaccuracy is not impressive. But it is not obvious that ChatGPT is better in terms of accuracy.

From what I’ve read, the main objection to ChatGPT is that it confidently reports false information. And I’m not sure there’s any way to justify this – for either company.

The threat of inaccurate information, in my mind, may slow down the adoption of AI-based search. And that bodes well for Google’s current market position.

Buy a dip

I’m not sure about the prospect of AI-based search changing the status quo. I will keep a close eye on the situation, though. Alphabet’s reliance on Google for its revenue means the implications of the change are significant.

Even if I am right about the Google search engine maintaining its position, there is still a risk for me. The idea of ​​a company investing heavily into the bottom line does not thrill me.

At the moment, though, I think Alphabet is just too cheap to ignore. That is why I have bought stocks for my portfolio.