Analyst Believes Google's AI Slip-up Won't Harm Long-Term Brand Trust

In the investment community, a resounding majority of analysts are bullish on Alphabet Inc., the parent company of Google. However, Bernstein analyst Mark Shmulik offers a different perspective with his neutral stance, which he believes positions him well to provide a counter-narrative to the recent panic around Google's AI stumble.

Last week Google faced backlash after releasing an AI-powered image-generation feature that produced images criticized for racial insensitivity. Consequently, Google halted the tool, a part of its Gemini chatbot. Subsequent market reaction saw Alphabet's shares take a hit, dropping over 4% amidst concerns over the implications for the company's AI efforts and brand reputation.

Google's legacy as a 'Hermit Kingdom'—one that was prudent with product releases—appears to be challenged by the fast-paced AI industry, prompting them to accelerate their innovations. This rush has led to multiple prominent AI mishaps over recent times, sparking worries that such errors could undermine trust in Google's services, particularly as AI continues to intertwine with search functionality.

Despite potential doubts about Google's AI capabilities, Shmulik suggests declaring the end to Google's era is premature. He points out that even as Microsoft's Bing intensifies its AI search integration, it hasn't managed to supplant Google's dominance in the search market and has actually lost revenue share.

Shmulik speculates that the skepticism around AI raised by Google's recent incident might delay general adoption of AI-powered search features. He posits that this could inadvertently benefit Google, giving the tech giant crucial time to refine its AI offerings and come back stronger.

Google, AI, Trust