Analysts at Rosenblatt cut their rating on Alphabet (NASDAQ:GOOGL) stock from Buy to Neutral, citing “multiple areas of transitional risk that recommend stepping back for a little while to see how the company handles it.”
The investment bank identified several risks for the tech giant, including the impact of AI on search, which could negatively affect search ad revenues due to the introduction of AI Overviews. There is also emerging evidence of search share loss to Bing, the analysts noted.
Furthermore, the shift of search ad revenue to retail media networks is expected to accelerate as retailers like Walmart (NYSE:WMT) follow Amazon's (NASDAQ:AMZN) lead in this area.
Another risk is AMZN’s aggressive entry into video advertising, with ads becoming default on Prime Video this year and a strong upfront sales effort launched in May, which could affect ad sales dynamics at YouTube.
“We also see risk that competitive dynamics push Alphabet into a higher-than-anticipated capex spending cycle for AI,” analysts said in a note.
They also trimmed the price target on the stock from $182 to $181.