Shares in Google-parent Alphabet lagged other Big Tech companies in the first quarter of 2023. A lingering search for a new chief financial officer and "questions on management" could be part of why Google stock underperformed, a Jefferies analyst said in a report.
When it reported second quarter earnings on July 25 last year, Google said CFO Ruth Porat would assume a newly created role of president and chief investment officer effective Sept. 1. Porat has continued to serve as CFO while the company looks for a successor.
In the first quarter of 2024, Google stock gained 8% while the S&P 500 rose 10%. Shares in Microsoft rose 12% while Amazon.com gained 19%. Facebook-parent Meta Platforms advanced 37%.
Google Stock: AI Threat To Ad Revenue
In a report, Jefferies analyst Brent Thill said the threat of generative artificial intelligence and Microsoft's alliance with startup Open AI has been pressuring Google stock.
"(OpenAI's) ChatGPT created the fear that, in the long-term, ad revenue could be pressured if users shift their behavior from search engines to chatbots when looking for information," Thill said.
He added that "Some investors ask whether CEO (Sundar) Pichai has led with enough force in responding to the AI threat. Also, it's been eight months since CFO Porat announced plans to transition from her role and there has been no update."
Part of Porat's new role involves oversight of Alphabet's "Other Bets." The tech giant has piled up billions of dollars in operating losses from these ventures.
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But as Google ramps up investments in artificial intelligence, it's scaling back investments in Other Bets.
At Jefferies, Thill said in his report that Alphabet is moving fast to catch up with Microsoft and OpenAI in generative AI.
Alphabet Stock: CFO Wish List
"(Google's) internal "code red" in early 2023 created urgency to move fast in AI," Thill said. "But the industry appears to have moved even faster. That reinforced the perception that Google is behind. We believe Google execs are fully aware of outside criticism and are motivated to step up the intensity behind both AI and cloud computing. We are also hopeful Google will bring on a new CFO that can support that intensity, implement more aggressive capital allocation and expense discipline and bring added transparency with investors."
Google hosts its annual cloud computing conference from April 9 to April 11.
Google stock owns an IBD Relative Strength Rating of 81 out of a best-possible 99, according to IBD Stock Checkup. That means it has outperformed 91% of stocks in the past 12 months.
Google is among AI stocks to watch.
On the stock market today, Google stock rose 3% to close at 155.49, moving into a buy zone.
Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
