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Alphabet Shares Slide As Samsung Considers Bing: ETFs in Focus
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The report that Samsung was considering replacing Google as the default browser in its devices came as a surprise to the market as much as it did to Google employees. As reported in a New York Time article, the South Korean consumer electronics giant was considering Microsoft’s (MSFT - Free Report) Bing over Google as the default browser. Google-parent Alphabet Inc. (GOOGL - Free Report) has lost 4% since the release of the news.
The report, highlights the difficulties that Google's search engine business faces from Bing, a relatively small player that has gained more attention lately due to the integration of artificial intelligence technology similar to that of ChatGPT. Notably, Google's search engine business generates $162 billion annually.
Google, which commands over 90% of the market share of the search market, has been using large language models to enhance the quality of search results. However, it has avoided incorporating AI completely into its search engines against the backdrop of false and bias statements.
Effect of the Possible Shift by Samsung
According to an article by Markets Insider, Alphabet shares dipped nearly 4% on the opening day of the week, clearing about $55 billion in market value. Microsoft saw its share rise by 1%. Advertisement revenues that Google generates from its search engines can take a huge blow. Google could end up losing $3 billion in annual revenues, which it earns from the current contract with Samsung.
With an additional $20 billion tied to a similar contract with Apple, which is also up for renewal this year, the stakes are high for Google to retain its dominant position in the search market and secure these critical revenue streams. Any potential loss of market share or major contract could have a significant impact on Google's bottom line and its position as a technology leader. As such, the company is likely to invest heavily in ensuring that its search engine remains the top choice for users across all devices and platforms.
Google’s Own Take on AI
To stay ahead of the competition and preserve its dominant market share in the search industry, Google is now actively exploring the integration of advanced AI technologies, to give a more personalized experience to users.
However, Google’s initial answer to ChatGPT, its own AI chatbot named Bard, was considered a letdown. As reported by Reuters in early February this year, Alphabet lost around $100 billion in market value after its AI chatbot shared inaccurate information in a promotional video.
ETFs in Focus
We have highlighted some ETFs with heavy exposure to Alphabet against the backdrop of the above news. These ETFs may face some threats if Google’s dominance in the search engine market starts eroding.
Fidelity MSCI Communication Services Index ETF (FCOM - Free Report)
The Fidelity MSCI Communication Services Index ETF seeks to provide investment returns that generally correspond to the performance of the MSCI USA IMI Communication Services 25/50 Index, which represents the performance of the communication services sector in the U.S. equity market. The fund has 12.7% of its assets to Alphabet Inc. Class A (GOOGL - Free Report) shares and 11.04% in Alphabet Inc.’s Class C (GOOG - Free Report) shares.
The fund has 113 securities in its basket with an asset base of $593.32 million. It trades in a daily average volume of about 93,200 shares and charges an annual fee of 0.08%. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Communication Services Select Sector SPDR Fund (XLC - Free Report)
The fund seeks to provide investment results that generally correspond to the yield performance of the Communication Services Select Sector Index, which provides an effective representation of the communication services sector of the S&P 500 Index. XLC has exposure to both Alphabet Inc. Class A and Class C shares with a 12.68% and 11.1% share, respectively.
In its basket, the fund has 24 securities and has gathered $10.98 billion in its asset base. The fund charges an annual fee of 0.10% and trades in a daily average volume of about 6.85 million shares. XLC has a Zacks ETF Rank #2 (Buy).
The iShares Global Comm Services ETF seeks to track the investment results of an index composed of global equities in the communication services sector. Having holdings in Alphabet Inc.’s both Class A and Class C shares, the fund has invested 12.41% in Class A shares and 10.88% in Class C shares.
IXP has amassed $264.28 million in its asset base, with 69 securities in its basket. The fund trades in a daily average volume of around 18,300 shares and charges an annual fee of 0.40%. IXP has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
The Invesco NASDAQ Internet ETF is based on the Nasdaq CTA Internet Index, which is a modified market-capitalization weighted index tracking the performance of the largest & most liquid U.S.-listed companies engaged in Internet-related businesses, listed on one of the three major U.S. stock exchanges. The fund has exposure only in Class C shares of Alphabet Inc., with an 8.65% share.
The fund has a basket of 85 securities and has amassed an asset base of $529.57 million. It trades in a daily average volume of about 19,000 shares and charges an annual fee of 0.60%. PNQI has a Zacks ETF Rank #2 (Buy) with a High risk outlook.
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Alphabet Shares Slide As Samsung Considers Bing: ETFs in Focus
The report that Samsung was considering replacing Google as the default browser in its devices came as a surprise to the market as much as it did to Google employees. As reported in a New York Time article, the South Korean consumer electronics giant was considering Microsoft’s (MSFT - Free Report) Bing over Google as the default browser. Google-parent Alphabet Inc. (GOOGL - Free Report) has lost 4% since the release of the news.
The report, highlights the difficulties that Google's search engine business faces from Bing, a relatively small player that has gained more attention lately due to the integration of artificial intelligence technology similar to that of ChatGPT. Notably, Google's search engine business generates $162 billion annually.
Google, which commands over 90% of the market share of the search market, has been using large language models to enhance the quality of search results. However, it has avoided incorporating AI completely into its search engines against the backdrop of false and bias statements.
Effect of the Possible Shift by Samsung
According to an article by Markets Insider, Alphabet shares dipped nearly 4% on the opening day of the week, clearing about $55 billion in market value. Microsoft saw its share rise by 1%. Advertisement revenues that Google generates from its search engines can take a huge blow. Google could end up losing $3 billion in annual revenues, which it earns from the current contract with Samsung.
With an additional $20 billion tied to a similar contract with Apple, which is also up for renewal this year, the stakes are high for Google to retain its dominant position in the search market and secure these critical revenue streams. Any potential loss of market share or major contract could have a significant impact on Google's bottom line and its position as a technology leader. As such, the company is likely to invest heavily in ensuring that its search engine remains the top choice for users across all devices and platforms.
Google’s Own Take on AI
To stay ahead of the competition and preserve its dominant market share in the search industry, Google is now actively exploring the integration of advanced AI technologies, to give a more personalized experience to users.
However, Google’s initial answer to ChatGPT, its own AI chatbot named Bard, was considered a letdown. As reported by Reuters in early February this year, Alphabet lost around $100 billion in market value after its AI chatbot shared inaccurate information in a promotional video.
ETFs in Focus
We have highlighted some ETFs with heavy exposure to Alphabet against the backdrop of the above news. These ETFs may face some threats if Google’s dominance in the search engine market starts eroding.
Fidelity MSCI Communication Services Index ETF (FCOM - Free Report)
The Fidelity MSCI Communication Services Index ETF seeks to provide investment returns that generally correspond to the performance of the MSCI USA IMI Communication Services 25/50 Index, which represents the performance of the communication services sector in the U.S. equity market. The fund has 12.7% of its assets to Alphabet Inc. Class A (GOOGL - Free Report) shares and 11.04% in Alphabet Inc.’s Class C (GOOG - Free Report) shares.
The fund has 113 securities in its basket with an asset base of $593.32 million. It trades in a daily average volume of about 93,200 shares and charges an annual fee of 0.08%. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Communication Services Select Sector SPDR Fund (XLC - Free Report)
The fund seeks to provide investment results that generally correspond to the yield performance of the Communication Services Select Sector Index, which provides an effective representation of the communication services sector of the S&P 500 Index. XLC has exposure to both Alphabet Inc. Class A and Class C shares with a 12.68% and 11.1% share, respectively.
In its basket, the fund has 24 securities and has gathered $10.98 billion in its asset base. The fund charges an annual fee of 0.10% and trades in a daily average volume of about 6.85 million shares. XLC has a Zacks ETF Rank #2 (Buy).
iShares Global Comm Services ETF (IXP - Free Report)
The iShares Global Comm Services ETF seeks to track the investment results of an index composed of global equities in the communication services sector. Having holdings in Alphabet Inc.’s both Class A and Class C shares, the fund has invested 12.41% in Class A shares and 10.88% in Class C shares.
IXP has amassed $264.28 million in its asset base, with 69 securities in its basket. The fund trades in a daily average volume of around 18,300 shares and charges an annual fee of 0.40%. IXP has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Invesco NASDAQ Internet ETF (PNQI - Free Report)
The Invesco NASDAQ Internet ETF is based on the Nasdaq CTA Internet Index, which is a modified market-capitalization weighted index tracking the performance of the largest & most liquid U.S.-listed companies engaged in Internet-related businesses, listed on one of the three major U.S. stock exchanges. The fund has exposure only in Class C shares of Alphabet Inc., with an 8.65% share.
The fund has a basket of 85 securities and has amassed an asset base of $529.57 million. It trades in a daily average volume of about 19,000 shares and charges an annual fee of 0.60%. PNQI has a Zacks ETF Rank #2 (Buy) with a High risk outlook.