What happened

It's not a great day for most stocks. But it's a markedly worse day for Alphabet (GOOG 0.81%) (GOOGL 0.72%) shareholders. While the Nasdaq Composite (^IXIC 1.22%) and the S&P 500 (^GSPC 0.90%) are both a bit in the red heading into Monday's closing bell, as of 3:39 p.m. ET, data from S&P Global Market Intelligence indicates Alphabet stock is down more than 3% in response to a surprising downgrade.

So what

Blame UBS, mostly. The bank dialed back its earlier buy call to a mere neutral stance, with analyst Lloyd Walmsley explaining: "Our concern is that SGE [generative AI-based search] will take up valuable ad real estate reducing the space Google has to serve up an ad."

It's a legitimate concern. The advent of artificial intelligence clearly threatens to disrupt the web even if investors don't yet know exactly how. Alphabet's Google is even building out its own consumer-facing AI tools like Bard in an effort to establish some sort of presence in the arena.

But that's not necessarily an ideal solution to the impending problem. Walmsley goes on to say, "[O]ur initial testing of [Google's] SGE shows material changes to SERP [Search Engine Results Pages] vs. the old Google... demonstrative of the potential disruption to Google's well-oiled Search monetization machine."

Seach engine advertising accounts for more than half of Alphabet's total revenue.

Conversational AI platforms like Bard and the popular ChatGPT also read the entirety of the web's websites in search of answers to user queries, often preventing an individual from visiting a particular website. If website owners find Google's artificial intelligence tools prevent traffic from coming to their site, they've got little incentive to continue partnering or working with the search engine giant that still handles more than 90% of the world's web queries, according to numbers from GlobalStats.

Now what

UBS analyst Walmsley's worry is well reasoned. We don't know how or when the rise of artificial intelligence will impact the way people find information on the web. It's undeniable, though, that it poses some degree of threat to Alphabet's dominance of the search space.

What's not clear is if the threat is large enough right now to merit a downgrade under the current circumstances. Alphabet shares were already trading below their consensus target of $131.64 prior to today's tumble. And the vast majority of the analyst community still considers the stock a strong buy.

Today's pullback is a buying opportunity for anyone who had the stock on their watchlist of prospects. UBS's worry is only something to bear in mind for now.