Don't count out Google in the AI race, and the stock sell-off after its Bard chatbot snafu was an overreaction, Gene Munster says

• The Alphabet stock sell-off is overblown as the company is a serious AI player, Deepwater Asset Management's Gene Munster said.
• Shares fell Wednesday after a Google's new Bard AI chatbot provided wrong info in a demonstration.

Alphabet's stock drop on Wednesday was overblown, and the company's artificial intelligence technology shouldn't be so easily dismissed, Deepwater Asset Management's Gene Munster said.

The Google stock suffered a 9% decline after reports revealed that Bard, the firm's newly developed AI chatbot, provided incorrect information in a promo meant to highlight the technology.

"I think it was an overreaction. It was an overreaction because, when we think about AI, this is a multidecade endeavor," Munster told CNBC Thursday. "To make a decision that Google has been behind the curve based on a demo, I think, is a little bit premature."

He also acknowledged that excitement around Microsoft's "new Bing" — an overhaul of the search engine to include AI capabilities from ChatGPT parent OpenAI — also contributed to Alphabet's sell off.

But Google has significantly outspent Microsoft in the development of AI and has organized itself into an AI-first company, Munster said. Since 2016, Alphabet is reported to have invested around $120 billion in the technology alongside other cloud computing.

"Google is not to be counted out when it comes to this AI race," he said.

Still, Alphabet's shares continued to sell off Thursday, dropping 5% to $94.07.

Meanwhile, Microsoft shares ticked up 0.1% Thursday,continuing its 2023 climb since dropping by nearly 30% last year, a decline that was fueled by rising interest rates battering the tech industry.