Analysts are willing to overlook Alphabet’ s disappointing quarter in lieu of its artificial intelligence push and focus on costs. Shares of the search giant fell more than 4% after the company missed Wall Street’s expectations for the fourth quarter. But, analysts lauded the company’s focus on artificial intelligence as it faces mounting pressures from popularized Microsoft-backed chatbot ChatGPT . Alphabet CEO Sundar Pichai said the company plans to release its LaMDA language model with search components “very soon.” Following this news, Goldman Sachs’ Eric Sheridan called Alphabet a leader in the space situated to capitalize on the AI trend in next decade. Wells Fargo’s Brian Fitzgerald said in a Friday note that a “new era” is ahead. “Longer-term, we reiterate our positive outlook on GOOGL – we continue to see Alphabet as the leading collection of AI/machine learning-driven businesses in our coverage universe and view the company as uniquely positioned to capitalize on the blurring of the lines between advertising, commerce and media consumption business models in the years ahead,” Sheridan wrote. According to Morgan Stanley’s Brian Nowak, commentary from Alphabet signals that the company is well “positioned to drive the next generation of AI technologies,” even though investment in this product pipeline could pressure near-term profitability. “Overall, we believe Google’s AI technology is likely best-in-class, but we also recognize that Google needs to carefully push forward innovations while maintaining its reputation for providing high quality service & accurate information,” wrote JPMorgan’s Doug Anmuth. Despite long-term confidence in the company and shares, analysts do expect Alphabet to face ongoing issues including a deteriorating advertising environment, difficult comps and persisting foreign exchange headwinds. “We believe the long-term thesis on GOOGL is well intact, but we would not be surprised to see the stock remain dislocated through H1:23,” wrote Evercore ISI’s Mark Mahaney in a Thursday note, saying that new AI launches should display the company’s leadership in the field. GOOGL 1D mountain GOOGL falls after earnings Analysts also cited some confidence in the company’s push to reengineer its cost structure and reduce inefficiencies. JPMorgan’s Anmuth said he’s encouraged by Alphabet’s “deeper commitment to rationalize the cost structure” and isn’t expecting another round of headcount reductions. “Compared to Meta’s efficiency rabbit, Google’s commentary that we’ll see a meaningful ‘visible impact’ in 2024 appears more the Tortoise in comparison,” said Bernstein’s Mark Shmulik. “Just remember who won that race.” Bank of America’s Justin Post, meanwhile, said the company’s strong core business creates a solid setup for margin leverage in the second half of 2023. “We see Alphabet as a more defensive stock in the group in 2023 with more relative earnings stability given utility of search, expense flexibility, healthy margins that will minimize cash flow concerns, and opportunity to support the stock with buybacks,” he wrote. — CNBC’s Michael Bloom contributed reporting