Alphabet, the parent company of Google, witnessed a surge in its shares by 5.3% on Thursday, reflecting the positive response from Wall Street to the launch of its latest artificial intelligence model, Gemini. The excitement around Gemini is attributed to its potential to narrow the gap in the competitive AI landscape, particularly against Microsoft-backed OpenAI.
Alphabet, a pioneer in AI research, faced a temporary setback when OpenAI's ChatGPT gained prominence last year, allowing Microsoft to aggressively deploy AI-powered software. However, Gemini appears poised to restore Alphabet's dominance in the field.
Key Features of Gemini:
Gemini boasts superior speed compared to OpenAI's latest model and exhibits the ability to process various forms of media, including video, audio, and text. Alphabet introduced three versions of Gemini, each tailored to utilize different amounts of processing power. This innovation addresses investor concerns about the high cost associated with running generative AI models, signaling Alphabet's commitment to staying at the forefront of AI innovation.
J.P. Morgan analysts noted that Gemini's release marks Google's proactive response to concerns about generative AI innovation and the associated costs. This move has translated into a remarkable addition of over $80 billion to Alphabet's market value.
Strategic Integration with Bard:
Alphabet has strategically integrated some of Gemini's technology into its Bard chatbot. The company plans to launch the most advanced version of Gemini through Bard early next year. This move aligns with Alphabet's commitment to enhancing user experiences and gaining momentum among developers.
Gemini's Impact on OpenAI and the AI Community:
Gemini's launch coincides with a period when OpenAI/ChatGPT users have expressed dissatisfaction with updates to the GPT model family, raising concerns about output quality. Analysts at Macquarie believe that if Gemini indeed outperforms GPT-4, it could garner significant user and developer support for Google, potentially shifting the balance of power in the AI landscape.
Addressing Cloud Revenue Competition:
Alphabet has been trailing behind Microsoft in the race for AI-driven cloud revenue. Microsoft's targeted approach toward big businesses has proven effective, while Google has focused on startups, which have curtailed spending amid economic uncertainty. Despite this, Gemini's introduction reflects Alphabet's commitment to competing with Microsoft in the rapidly growing AI sector.
Outlook for Alphabet and Microsoft:
Alphabet's market value increase comes in contrast to a significant selloff in February following issues with its Bard chatbot. The current positive market sentiment positions Alphabet to challenge Microsoft's AI lead, with both companies experiencing around 50% growth in their shares this year. Microsoft currently trades at a higher multiple of 30.68 times its 12-month forward earnings estimates compared to Alphabet's 19.59, indicating the market's confidence in Microsoft's AI endeavors.
Conclusion:
While some critics argue that Google is late to the AI party, the launch of Gemini underscores Alphabet's commitment to getting it right and seizing the vast opportunities in the AI space. The strategic integration with Bard, combined with Gemini's impressive capabilities, positions Alphabet to thrive in the evolving landscape of artificial intelligence. As the AI race continues to unfold, Alphabet's Gemini has emerged as a powerful contender, reshaping the narrative and reaffirming Alphabet's leadership in the AI domain.
