Alphabet vs Microsoft » The Battle of Artificial Intelligence (AI)
Microsoft has declared war on Google’s search monopoly as the race for artificial intelligence (AI) supremacy begins.
ChatGPT ignites a new race for AI supremacy
Enthusiasm for new breakthroughs in artificial intelligence is growing after the initial success of the artificial intelligence-based chatbot ChatGPT, a digitally trained service that can answer complex questions in a conversational manner and was developed by a company called OpenAI. Its ability to answer a wide range of questions with in-depth answers, whether it’s being asked to fix code, write a screenplay, explain scientific theories, or even offer life advice, has made ChatGPT the hottest new technology around captured the imagination of the markets .
Citigroup said it’s too early to see ChatGPT’s true impact, but said it’s a “significant breakthrough” that “may lend itself to many applications, including research.”
Microsoft invests in OpenAI
Microsoft invested $1 billion in OpenAI in 2019, but was quick to pledge billions more, potentially up to $10 billion, to the company after the huge success and popularity of ChatGPT.
Microsoft uses OpenAI products to modernize its Bing search engine and improve its web browser. Bing is powered by OpenAI’s open language model, which is considered more advanced than what ChatGPT runs on.
The new Bing is now available in preview, which allows users to submit a limited number of questions and there is a waitlist for full access, with the intention of opening it up to millions of people within weeks.
“This technology will reshape nearly every software category,” said CEO Satya Nadella.
Alphabet’s Bard got off to a rocky start
In response to ChatGPT’s initial success, Alphabet had to react quickly – much sooner than desired – and demonstrate its own AI developments. The fact that Alphabet has lost more than $100 billion in value since unveiling its own chatbot, called Bard, on concerns it’s lagging behind the service after providing inaccurate information in advertising shows how this new technological era is impacting investors.
The reason the incident had such an impact is because Bard was only introduced to select users before it went public in the coming weeks when it faces its first test as markets assess how it compares to ChatGPT cuts off
Just days after the slip, the vice president of main search engine Google, Probhakar Raghavan, told the German newspaper Welt am Sonntag that AI-powered chatbots had pitfalls. “This type of artificial intelligence that we’re talking about can sometimes lead to what we call hallucinations. This is then expressed in the form of a machine providing a convincing but entirely made-up answer.”
Microsoft declares war on Google
CEO Satya Nadella has declared war on Google’s search monopoly, saying Microsoft can win a battle for margins because it’s built from practically nothing, which would pose a major threat since Google doesn’t have the same luxury.
In fact, Google handles 93% of internet searches worldwide, while Microsoft’s Bing accounts for just 3%. This shows that Microsoft has everything to gain and little to lose.
“From now on it is [gross margin] Search will be gone forever,” Nadella told the Financial Times last week.
Alphabet’s problem is that it has the most to lose at this stage of the race, while its early rivals have the most to gain. Investors have begun to worry that its research monopoly could be under threat while other big players watch the market and that its technology could be overtaken by a competitor. Even if it maintains its leadership position, increased competition from Microsoft could erode Alphabet’s margins.
Microsoft’s Nadella said he was willing to accept any search demonestization if it would help him gain a foothold at Alphabet. “There’s such latitude in research that for us it’s incremental. It’s not for Google, they have to defend everything,” he said.
Still, the responsibility lies with Microsoft to make things happen. Alphabet is the dominant search engine and most people have never used any other search engine.
Changing people’s habits is difficult, and Alphabet has the expertise and, more importantly, the data to drive artificial intelligence forward. It may have been a rocky start, but investors should keep in mind that this is just the beginning of what is still a fledgling industry, and that Alphabet has been investing in AI for at least a decade.
Plus, it’s not a two-horse race considering a whole host of other companies are working on their own chatbots, including but not limited to Chinese tech companies Alibaba and Baidu. This leaves room for another company to take the lead and means the world will have plenty of choice for years to come. This should help technology advance quickly as everyone tries to stay ahead of the curve.
How to invest in AI stocks
Investors are eagerly exploring new opportunities in artificial intelligence, and Alphabet and Microsoft aren’t the only players hoping to make a name for themselves in the space. Other big tech giants like IBM and Amazon as well as a number of smaller pure players like C3.ai are working on AI.
There are also other companies that will prove crucial to the future of artificial intelligence, such as semiconductor and networking companies that supply the equipment needed to power the energy-hungry industry.
For example, Bloomberg data released this month suggests that the AI networking market is expected to be an $8.5 billion market by 2027, up from just $1.6 billion in 2022 , and companies like NVIDIA, Cisco, Arista, and Juniper could benefit from this.
What’s next for Alphabet stock?
Alphabet’s shares are down 12% since hitting a five-month high earlier this month. The stock is set to lose ground for the fourth consecutive day today, but the 50-day moving average has held as firm ground for the past three days, suggesting this offers some level of support. Each slip below includes less than $86.
A return above $101 is the immediate upside target before targeting $104, in line with the lows we saw last May and July and the current 200-day moving average. Longer-term, brokers see upside potential of up to 32% from current levels, with an average target price of $125.44, which was last seen in April 2022.
Source: StoneX, TradingView
What’s next for Microsoft stock?
Microsoft shares broke the bearish trend that had plagued the stock for more than a year after climbing nearly 23% since the last low in early 2023, and rebounded above the 200-day moving for the first time in 10 months -Average.
We have seen signs that $275 offers some resistance and the RSI is about to test overbought territory, which could make the recent momentum more difficult to sustain. A move towards $293, the high seen in April and again in August, is on the cards if a break to the upside here.
The stock could fall back towards the 200-day moving average, which currently stands at $253.75, if it loses momentum. A move below $250 would then be on the radar before the other moving averages come back into play.
Source: StoneX, TradingView
By Joshua Warner, FOREX.com » Official Site
Disclaimer: The information and opinions contained in this report are for general information only and do not constitute an offer or a solicitation to buy or sell any foreign exchange contract or CFD. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness and accepts no responsibility for any direct, indirect or consequential damages that may arise from reliance on this information by anyone.