Alphabet (NASDAQ: GOOG) stock is ‘uninvestable’ right now. That’s the view of UK fund manager Stephen Yiu, who runs the Blue Whale Growth fund.
I have a large position in Google owner Alphabet, so Yiu’s bearish view got my attention. Should I be selling the tech stock?
ChatGPT threat
In a recent article, Yiu said that Alphabet was uninvestable due to the power of artificial intelligence (AI)-powered chatbot ChatGPT.
After a few days of experimenting with the AI tool, the portfolio manager came to the conclusion that advances in technology have made Google – which previously had a very strong ‘economic moat’ – vulnerable to competitors such as Microsoft’s Bing.
Yiu doesn’t think this is the end for Alphabet. He expects Google to maintain its position as the dominant search engine (it currently has a 90% market share of the search industry).
However, Yiu needs to be able to model the performance of a company over a period of at least five years before he can invest in it. And he doesn’t believe he can accurately do this here, given that Google could lose market share to competitors.
Not the only bearish investor
It’s worth noting that Yiu isn’t the only portfolio manager who’s turned bearish on Alphabet recently. Earlier this month, it came to light that Brad Gerstner, CEO and Founder of Altimeter Capital, just sold his Alphabet stock.
Gerstner – who is one of the biggest names in the tech investing world and has been a driving force behind Meta Platforms’ rebound this year – is concerned that ChatGPT has secured a ‘leadership position’ in search and AI.
“They’ve breached the Google moat,” said Gerstner in an interview with CNBC. “200m people now treat ChatGPT a verb as synonymous with discovery in the age of AI,” he added.
My view
As for my view on Alphabet, I am a bit concerned that two big-name investors are bearish on the stock right now. However, I’m not ready to write it off just yet.
Yes, ChatGPT is a major threat to the company’s search platform. However, the way I see it, it’s still very early days in the ‘generative AI’ race. And I expect Alphabet to fight back. After all, it’s one of the biggest players in the AI space.
And Alphabet is a diversified company. For example, it also has YouTube, which is the most dominant content platform on the planet and growing rapidly. Last quarter, it generated $6.7bn in advertising revenue.
Additionally, it has a fast-growing cloud computing division. This division, which is now profitable, generated revenue of around $7.5bn last quarter.
On top of this, Alphabet operates in a number of other high-growth markets including self-driving cars, digital healthcare, and smart home technology. So it has multiple growth drivers.
Meanwhile, the stock trades at a relatively low valuation. Currently, the forward-looking price-to-earnings (P/E) ratio here is around 20. I see value in the stock at that multiple.
So while Yiu and Gerstner are avoiding Alphabet at present, I’m happy to hold on to my stock for now and would buy if I didn’t already own any stock. I believe the company can still generate solid returns for investors from here.
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- Source: https://www.fool.co.uk/2023/05/10/alphabet-stock-is-uninvestable-due-to-chatgpt-according-to-this-top-uk-investor/
