Alphabet (NASDAQ:GOOGL) shares trade almost 1% lower in premarket Monday after Loop Capital analysts downgraded the stock to Hold from Buy with a price target of $124 per share.
The downgrade call comes after a mini-rally in GOOGL shares following the company’s successful I/O event that the analysts say “opened some eyes to the company’s strong position in AI.”
Still, they have some concerns that prompted them to downgrade the stock.
“We think concern over whether the company can maintain its dominant position through this massive technology transformation will hold back valuation. We consider search competition from Microsoft (NASDAQ:MSFT) a lesser threat than risk of displacement from behavioral change as users interact more with AI assistants to find information,” the analysts wrote in a note.
Loop Capital analysts also see the tech behemoth cutting costs faster than the Street is anticipating.
“We think long-term structural uncertainties surrounding the AI transition will keep investors nervous as the landscape evolves and put a ceiling on valuation,” they concluded.
Google shares are up 32.9% year-to-date.