Alphabet (NASDAQ: GOOG) stock has taken a bit of a hit. Earlier this month, the Big Tech stock was trading near $110. Today however, it’s near $95.
Is this a good buying opportunity? Let’s discuss.
ChatGPT vs Bard
The reason Alphabet stock has fallen has to do with Microsoft-backed artificial intelligence-based chat platform ChatGPT.
Since ChatGPT was launched in November, it has created a huge amount of hype. In its first two months, it reached more than 100m users, making it the fastest growing consumer internet application in history.
ChatGPT is a big threat to Alphabet. That’s because it can be used as a search platform.
So what Alphabet has done is release its own AI-based chat platform, Bard. However, the launch of this product – which was very rushed – has backfired in a big way. Because on its launch day, Bard made a factual error.
This sent Alphabet stock down sharply. Investors are concerned that Microsoft now has an edge in this area of technology.
It’s worth noting that Microsoft plans to incorporate its ChatGPT technology into its own search platform, Bing.
New technology
Personally, I see Alphabet’s share price fall as a massive overreaction. Because here’s the thing. ChatGPT makes mistakes too. A lot of them.
I have used the platform quite a bit since its launch and it has given me a load of wrong answers. For example, when I asked it who won a particular sports game, it told me the wrong team.
So neither platform is perfect. Ultimately, right now, the technology is still in its infancy. And it’s way too early to declare a winner in the chat platform race.
Buying opportunity?
Looking beyond this issue, there’s a lot to like about Alphabet, to my mind.
I don’t think people are going to stop using Google – which generates a ton of cash for the company every quarter – any time soon. I’m certainly not planning to.
And I don’t think YouTube is going to go out of fashion any time soon. This platform is just going from strength to strength. Last quarter, it generated $8bn in advertising revenue.
Meanwhile, Alphabet continues to generate strong growth in its cloud computing division. Last quarter, cloud revenue was up 32% year on year.
In terms of artificial intelligence, I still expect Alphabet to be a leader here. Over the last decade, the company has made dozens of AI-based acquisitions. So it is well positioned to lead the AI revolution. It plans to introduce new AI features into its search platform soon.
As for the valuation, I believe there’s a lot of value on offer right now. Currently, Alphabet has a price-to-earnings (P/E) ratio of 18.8. I think that multiple is a bargain.
Now, I already have a large holding in Alphabet. It’s actually my largest holding overall. So I don’t plan to buy any more shares in the immediate future.
However, if I didn’t own the stock today, or I was looking to boost my position, I would definitely consider buying it now.
I think the recent share price weakness has provided a great buying opportunity.
