Alphabet, Inc (GOOG) was my favorite stock in my generative AI trade. No more. After OpenAI announced SearchGPT, GOOG fell 3.0%. The decline followed a 5.0% post-earnings loss and confirmed a bearish breakdown below the 50-day moving average (DMA) (the red line in the chart below). While SearchGPT is still a prototype, even the idea of it confirms nagging fears that generative AI vendors will find ways to chip away at Google’s dominance in search. Google should be up to the task to continue improving its own integration of generative AI and search, but my generative AI trade is about being unapologetically bullish about the future of this basket. I can be bullish despite competition but not unapologetically. Thus, SearchGPT shoves Google to a footnote in the generative AI trade: a stock that stays on my radar but buys are subject to a high bar of technical positioning.
Here is how ChatGPT describes its upcoming enhancement:
“OpenAI is testing SearchGPT, a prototype designed to enhance search capabilities using AI to provide timely answers with clear sources. This prototype aims to combine conversational AI with real-time web information, featuring direct responses and links to original content. OpenAI collaborates with publishers to ensure high-quality, attributed information and offers tools for managing content visibility. The goal is to integrate these features into ChatGPT after feedback from users and publishers. More information and sign-up options are available here.”
I am particularly interested to see how OpenAI maintains opportunities for publishers to get discovered and receive traffic from this search experience.
In the meantime, GOOG is sure to suffer some kind of overhang, so I will require a greater discount before buying in. I boldly stepped into earnings with a call spread, and I charged ahead with my regular trading plan by adding another call spread after the post-earnings drop (which I thought was overdone anyway). I stepped away on the follow-through selling. Now, I am not interested in trying GOOG again until it reaches around $158 which would close the gap from April earnings. Of course, if GOOG manages to reestablish its 50DMA as an uptrend and support, the stock will achieve the high bar of technical positioning that will help me overlook SearchGPT.
Be careful out there!
Full disclosure: long GOOG call spreads