Investors should buy Alphabet stock as soaring interest in ChatGPT shows no sign of negatively impacting Google's search business, Bank of America says

• The overnight success of ChatGPT has yet to negatively impact Google's business, according to Bank of America.
• BofA highlighted that Google's downloads remain stable despite the surge in ChatGPT traffic and Bing downloads.
• The bank reiterated its "Buy" rating of Alphabet and $125 price target, representing 40% upside.

Ever since OpenAI unleashed ChatGPT late last year, investors have grown concerned that the chatbot could steal market share from Alphabet's Google search business.

More than 100 million users flocked to ChatGPT within the first few weeks of its launch, and the company's partnership with Microsoft has revitalized interest in Bing, a direct competitor of Google. Investor concerns essentially helped quickly erase $100 billion in market value from Alphabet.

But according to Bank of America, there have yet to be any negative signs that suggest Google's core business is deteriorating at the expense of the newly launched ChatGPT, and that should entice investors to buy the stock.

Looking at recent trends in download activity, the bank found that since the release of ChatGPT, Google has seen no noticeable downtick in daily downloads of its app. At the same time, Bing has seen soaring a surge in download activity, as Microsoft required users to download their app in order to gain quicker access to its version of ChatGPT.

"This requirement is likely fueling some Bing downloads," BofA said in a recent note.

Bing and ChatGPT are still experiencing some eye-popping growth rates. Daily traffic to ChatGPT is on track to grow 96% month-over-month in February, and search interest is up 124%, according to the note.

Meanwhile, Bing mobile downloads have soared since its February 7 announcement with ChatGPT. Prior to the announcement, daily global downloads of Bing averaged 11,300. On February 9, downloads of Bing peaked at 286,500. For context, daily global downloads of Google average at just under 400,000.

What's important to Alphabet investors is whether the surge in interest in ChatGPT and Bing is enough to have a noticeable impact on Google's business, and according to BofA, the answer so far is no.

"The uptick in Bing downloads has not impacted Google download activity, which has been stable in January and February, and we are not aware of any slowing in Google search revenues that could be attributed to the late-2022 ChatGPT launch," BofA said.

Now, with sentiment in Alphabet's stock deteriorating and the stock significantly underperforming the Nasdaq 100, investors should consider buying the stock, according to the note. The bank reiterated its "Buy" rating and $125 price target, which represents potential upside of about 40% from current levels.

The bank said the bull case behind Alphabet includes its headstart in artificial intelligence and machine learning, potential upside in YouTube Shorts, a renewed discipline in expense management and stock buybacks, an a compelling valuation.

"We see AI advantages for Google, and opportunity for AI to increase the value of Alphabet's platform (search, Cloud and Waymo)," BofA said.