Alphabet adds $115 billion in value after challenging AI skeptics

(Bloomberg) — Alphabet Inc. is back. to the game. It is an artificial intelligence game.

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Shares in Google’s owner have lagged behind other major companies this year amid fears it is losing ground in the race to deploy artificial intelligence products. However, since it unveiled its latest AI tools at a developer conference last week, the stock is up 9%, adding $115 billion to market value and erasing underperformance against peers like Apple Inc. and Microsoft Corp.

“Investors are wondering whether Alphabet is the winner or the loser as AI is changing the landscape,” said Jason Benowitz, senior portfolio manager at VCI Roosevelt. “This puts them more firmly in the winning camp.”

With the excitement around building AI, Alphabet has largely missed out on the stellar gains seen by many of its tech peers, particularly as the rapid growth of OpenAI’s ChatGPT is seen as a potential threat to the dominance of its search business. So last week’s announcement of a more conversational search engine and that the company was making its AI-powered chatbot widely available provided a nudge at the right time.

Morgan Stanley analyst Brian Nowak was among the Wall Street analysts encouraged by Google’s presentation after what he called “decaying artificial intelligence” in stocks.

If the company can successfully integrate new AI features into its products that serve hundreds of millions of people, it should “build more confidence in the paid AI of the future,” Nowak wrote in a research note after the event.

Read more: Artificial intelligence separates the winners from the losers: monitoring profits

For Bill Ackman’s Pershing yard, the stock’s gain came at an opportune moment. On Monday, the hedge fund disclosed that it purchased more than 10 million of the company’s Class A and Class C shares in the first quarter, worth about $1.2 billion at current prices.

Others have also benefited. Google co-founder Sergey Brin gifted nearly $600 million worth of Alphabet shares Thursday during a week that saw his fortune increase by more than two years.

Even after such a strong rally, Alphabet isn’t that expensive compared to its peers. At 19 times, its EPS ratio is the highest in months, but it’s still significantly cheaper than Microsoft and Apple, which are priced at 29 and 27 times, respectively.

Of course, there are still many skeptics. Loop Capital analyst Rob Sanderson says continued concerns about AI risks will prevent Alphabet’s cheaper market valuation from expanding. The analyst downgraded the stock to stay from a buy on Monday, though he sees the company as a major beneficiary of AI adoption over the long term.

“We do not view this as an existential threat to Google, but this behavior will become a competitive force against its dominance in connecting users with information,” he wrote.

Technical chart for today

Alphabet’s rally last week has pushed its Relative Strength Index beyond the 70 level which indicates to some technical analysts that the stock may have gone too far, too quickly. Shares were trading up 0.4% on Tuesday, still in overbought territory.

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  • Michael Perry, the money manager made famous on The Big Short, now has the Big Long when it comes to China. He boosted his bullish bets on e-commerce giant Inc. and Alibaba Group Holding Ltd. , even as other hedge funds cool off from reopening deals in the country.

  • Microsoft’s $69 billion takeover bid for game developer Activision Blizzard Inc. back from the brink after the European Union gave its blessing for one of the biggest deals in history.

  • Nelson Peltz, the activist investor who launched and then relinquished a proxy battle earlier this year at The Walt Disney Company, recently added to his stake in the company, according to a person familiar with his holdings.

  • Rakuten Group Inc. plans to To issue new shares to raise 332.2 billion yen ($2.4 billion) to shore up the depleted capital of its loss-making mobile unit.

– With assistance from Subrat Patnaik.

(It updates the chart and stock movement in the technical chart section for the day.)

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