Buy this megacap tech stock that's set to rally more than 20% due to AI, says Citizens
The ramp up in artificial intelligence may send shares of Alphabet higher in the coming months, according to Citizens. The investment firm upgraded the "Magnificent Seven" name to market outperform from market perform and set its price target at $220, implying nearly 27% upside from Thursday's close. "We believe AI is a net tailwind, with ChatGPT's impact too small today to move enough queries away from Google to materially impact results, while AI is expanding the search opportunity by answering a broader array of queries and extending monetization as AI better infers user intent," analyst Andrew Boone wrote in a note published Thursday. While the megacap tech stock has fallen more than 8% this year, it has rebounded about 6% over the past three months. It has also jumped more than 4% in the past week amid investor confidence in AI, which propelled other stocks linked to the industry like Nvidia higher this week as well. GOOGL 3M mountain GOOGL, 3-month Boone thinks that Google's AI Overviews – a feature that offers a summary of answers to search questions at the top of Search – will reach 4 billion monthly users by the third quarter of this year, seeing that the feature will cover about two-thirds of queries by the next quarter. That would be up from 1.5 billion monthly users in the first quarter of this year. "With AI Overviews becoming generally available in the U.S. as of May and leading to 10% query growth in testing, we believe AI is a net tailwind," he continued. "Net/net, AI is growing the use of search at a faster rate than ChatGPT is taking share." The analyst also projects that Search revenue growth will accelerate in the second as a result of AI supporting query growth and the development of Google's ad products. Wall Street is mostly bullish on Alphabet, as 43 out of 55 analysts have issued strong buy or buy ratings on the stock. Its nearly $202 consensus target also reflects more than 16% upside from here.
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