For now, Google and YouTube parent company Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has a dominant position in the search-engine market. However, nowadays there are other companies, like Microsoft (NASDAQ:MSFT), which could use artificial intelligence technology to steal Alphabet’s market share. Recent testimony suggests that a Google executive is concerned about this problem, so it might not be wise to buy GOOG stock now.
Microsoft’s strength in the cloud computing field could be a major issue for Alphabet. All in all, it’s prudent to wait for more encouraging data from Alphabet before considering a share position.
GOOG Stock Plunges on Cloud Concerns
Oct. 25 wasn’t a great day for Alphabet’s investors. That day, GOOG stock fell 9.5%, marking the worst single-day decline in the Alphabet share price since March of 2020, when Covid-19 wreaked havoc on the financial markets.
The negative catalyst that day was Alphabet’s third-quarter 2023 earnings results. Specifically, the market was disappointed because Alphabet’s Google Cloud revenue declined 28% quarter over quarter, to $8.4 billion. Moreover, this result fell short of analysts’ forecast of $8.6 billion.
On that topic, Max Willens, an analyst with Insider Intelligence, observed that cloud computing is a “much lumpier business than advertising, and one where Google is facing stiff competition.” Presumably, Willens was referring to Google’s fierce competition from Microsoft and Amazon (NASDAQ:AMZN), among others.
As Bloomberg noted, “Microsoft’s Azure cloud business posted 29% sales growth in the September quarter, faster than analysts estimated.” It may be presumptuous to declare winners and losers in the cloud-computing wars. Yet, it’s fair to conclude that Alphabet’s path forward will be challenging.
Worrisome Testimony From a Google Executive
Shifting topics now from the cloud to search engines, Prabhakar Raghavan, a Google senior vice president, recently offered some troubling testimony. Specifically, Raghavan expressed concern that Google could become “the next roadkill.”
Raghavan issued this statement while testifying during a U.S. Justice Department’s antitrust case against Google. He cited a China-based app TikTok as a threat, saying, “Young people particularly are increasingly turning to TikTok.”
Furthermore, Raghavan stated, “Users are increasingly beginning their shopping journeys on Amazon.” To Raghavan’s commentary, I would add that Microsoft’s AI-enhanced Bing search engine poses a genuine threat to Google’s search engine dominance.
Maybe Raghavan was only making those remarks to convince the Justice Department that Google doesn’t hold a monopoly over the U.S. search engine market. Nonetheless, Raghavan’s points are duly noted and should prompt Alphabet’s loyal investors to reconsider their positions.
GOOG Stock Is Vulnerable, so Watch Out
As the old saying goes, the market has spoken. Investors didn’t like the results from Alphabet’s cloud-computing business, and they dumped their shares.
Also, it’s not a positive sign when an Google executive is worried that the company’s search engine could become “roadkill.” Thus, Alphabet’s challenges are quite formidable and investors should stay away from GOOG stock for the time being.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
