Wall Street analysts are sounding the alarm on Alphabet Inc. (NASDAQ: GOOG), warning of a potential 10% correction as two major AI-related problems cloud the stock's outlook just days before its pivotal April 29 earnings call. The warning follows a sharp 23% surge that saw Google's share price rocket from $273 to $335 in just two weeks, a rally now at risk of reversal as skepticism grows over the tangible monetization of its next-generation artificial intelligence investments.

2 Problems Plague Google Stock Before Earnings Call

Wall Street is worried that Google’s AI could self-sabotage its stock prospects if the earnings call shows more capex for summaries. Search for something online, and Google summarizes what you’re looking for in its AI-based Search Generative Experience. While this has received mixed reactions from users, the cost to run the new tech is much higher than the previous blue link search results.

Every time a user asks the AI a question, it costs Google more in computing power. This includes running electricity and putting chips to work, rather than the traditional search results. Wall Street is worried that the operating costs will eat up Google’s ad revenues, as the cost-to-serve is more expensive. Google will report the capex vs returns in the earnings call, and the numbers will decide which direction the stock will move.

Investors are worried that Alphabet is spending too much money on AI data centers and custom chips without seeing immediate returns. The tech giant’s capital expenditure to build its AI infrastructure stands at $175 billion to $185 billion. If the free cash flow (FCF) numbers dip in the earnings call, Google stock could face a drubbing. Analysts could begin downgrading GOOG due to the decrease in cash flow.