Is it a sign of serious problems that Google and YouTube parent company Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) announced a workforce reduction? GOOG stock actually soared when that announcement was made — and for good reason. Alphabet isn’t actually in trouble, and the company’s anticipated artificial intelligence (AI) product launches could significantly boost Alphabet’s revenue in 2023.
Like Amazon (NASDAQ:AMZN) and Meta Platforms (NASDAQ:META), Alphabet is a member of what I call the “Big Tech Layoff Club.” After a bruising 2022, investors must now decide whether a slimmer Alphabet will deliver strong value to its shareholders in 2023.
I’m voting “yes,” as Alphabet’s workforce reduction doesn’t mean the company is failing. Indeed, I expect shares of Alphabet to hit $150 sometime this year as the company could introduce notable AI offerings during the coming months.
GOOG Stock Soared Despite Layoff Announcement
Was Jan. 20 a bad day for Alphabet’s shareholders or a good one? On that day, Alphabet CEO Sundar Pichai announced a workforce reduction of “approximately 12,000 roles.” This would equate to roughly 6% of Alphabet’s staff.
Really, this is just a right-sizing, as Alphabet had increased its workforce by almost one-third from 2020 to 2021. The company was too bloated, so while job cuts are always unfortunate, they were necessary in this case.
So, it actually makes sense that GOOG stock rallied 5.72% on Jan. 20, the day of the workforce reduction announcement. Financial traders understood that Alphabet is doing what’s necessary. Besides, they surely saw this coming long before the announcement was made.
Moreover, the job cuts could bolster Alphabet’s top and bottom lines. Bernstein analyst Mark Shmulik envisions those cuts as potentially saving Alphabet $2.5 billion to $3 billion in costs.
Alphabet Expects to Ramp Up Its AI Offerings
There’s a part of Pichai’s announcement that some investors seem to be ignoring. The CEO said, “We have a substantial opportunity in front of us with AI across our products.” Pichai added that Alphabet is prepared to approach that opportunity “boldly and responsibly.”
Some people are so focused on the job cuts that they’re ignoring Alphabet’s AI-product ambitions. For instance, Alphabet’s Google Cloud recently introduced updated AI products for retailers. This might be just the beginning of a major push into machine learning for Alphabet this year.
According to a Reuters report, Alphabet “has been working on a major AI launch,” which could take place in the spring. It’s also been reported that Google plans to introduce over 20 new products, plus a “search engine including chatbot features.”
GOOG Stock Should Hit $150 in 2023
By cutting some jobs, Alphabet can reduce its expenditures and focus on developing innovative products. Don’t be surprised if Alphabet and Google unveil exciting, AI-enhanced products in the coming months.
GOOG stock reached the $150 level in November of 2021. I expect the stock to revisit that resistance point sometime this year. Traders were right to buy Alphabet shares after Pichai’s announcement, as the news was bad for some employees but positive overall for the company.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.