Is it time to load up on shares of Google and YouTube parent company Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)? Not so fast! GOOG stock could easily lose value in 2023 as Microsoft (NASDAQ:MSFT) takes a powerful lead in the artificial intelligence arms race. There’s an antitrust lawsuit that continues to hang over Alphabet and it could drag on for a while.
Investing successfully in Alphabet used to be as easy as A, B, C. Those days are in the rear-view mirror, however, as Google isn’t the only player in town anymore. Indeed, Microsoft’s Bing poses a serious threat to Google’s search engine market dominance.
At the same time, investors can’t afford to ignore Alphabet’s legal woes. It might make sense to revisit Alphabet sometime next year or maybe in 2025, but now isn’t a good time to take a position.
Another Unfortunate Development in Google vs. the Government
If you assumed that Alphabet’s battle with the U.S. government would be over and done with soon, think again. Per Reuters, the Department of Justice alleged that Google “failed to preserve certain internal corporate ‘chat’ communications.”
This is part of U.S. regulators’ ongoing antitrust litigation against Google. Alphabet responded by denying that it intentionally destroyed evidence, and by claiming it “made ‘reasonable’ efforts to preserve communication records.”
Google’s lawyers called the allegation “meritless,” but this certainly won’t stop the DOJ from pursuing sanctions against the company. As long as this case drags on, there could be substantial financial and reputational damage done to Alphabet.
Microsoft’s AI Push Is Bad for GOOG Stock
Meanwhile, Alphabet is busy trying to catch up to Microsoft in the AI arms race. As you may already be aware, Microsoft has invested in OpenAI’s ChatGPT and has enhanced the Bing search engine with this technology.
AI-enhanced Bing has gained in popularity. In contrast, Google’s AI event hardly moved the needle in the race to gain market share. Moreover, Google admitted that its AI chatbot, known as Bard, can give “misleading or false information.”
Not only that, but there’s evidence that Bing is gaining on Google in the search engine market. Per Reuters, data through March 20 indicates that page visits on Bing have increased 15.8% since Microsoft introduced the AI-powered version of Bing on Feb. 7. During that same time period, page visits on Google declined nearly 1%.
What You Can Do Now
When a company has an ongoing battle with the government, this can cause problems for that company and its shareholders. So, it’s bad news that Alphabet is still engaged in a legal dispute with antitrust regulators.
Furthermore, it looks like Microsoft is eating Alphabet’s lunch and dinner in the generative AI market. Therefore, the bear case against GOOG stock is much stronger than the perma-bulls might think it is, and it’s wise not to invest in Alphabet now.
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.