Clash of AI Giants: Microsoft or Alphabet for Long-Term Exposure?

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Clash of AI Giants:

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or Alphabet for Long-Term Exposure?

Acording to Indeed’s report on job postings at the end of 2023, software development, IT, mathematics, and finance had the most significant year-over-year decline, ranging from 44.8% to 32.2%. This signals that the automation of white-collar jobs is taking root.

While experts in these fields will always be needed, much of entry-level to mid-tier work is heading for replacement by artificial intelligence (AI) agents. In April 2023, Goldman Sachs forecasted that up to two-thirds of jobs could be somewhat AI-powered.

And as manual labor shifts to AI, the global AI market size is projected to add up to $4.4 trillion in value, according to McKinsey & Company.

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now have to decide which AI exposure they prefer in that growth?

On the infrastructural side, NVIDIA Corporation (NASDAQ:) and Advanced Micro Devices Inc (NASDAQ:) are vying to establish AI chip dominance. However, on the software services and AI integration side, two Big Tech giants—

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(NASDAQ:) and

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Corporation (NASDAQ:) — are vying for AI supremacy.

Why

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?

The company’s legacy software was enhanced with the launch of

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Copilot. According to 6sense,

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’s Office 365 productivity suite has an estimated 23.58% market share, with

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Excel alone at 10.42%.

More importantly, the company developed

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Graph and Fabric to facilitate training AI models. Graph allows developers to utilize

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services in LLM training while integrating their products into the broader

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ecosystem; fabric is an all-in-one analytics platform for various uses, from business intelligence to data science.

Underlying

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’s ecosystem is its take on cloud computing – Azure. Specifically, Azure OpenAI seamlessly facilitates the integration of ChatGPT 3.5 and later versions via plugins. They range from generative images through

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to Azure SQL and

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Translator.

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Azure’s market share in cloud computing has steadily grown over the years. Synergy Research Group estimated that three companies—

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(NASDAQ:) (AWS),

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(Azure), and Alphabet (NASDAQ:) (

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Cloud )—shared 66% of the global cloud in Q3 2023: Azure, AWS, and

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(Azure). However, as Azure is closing with AWS at 23% vs. 32% market share, respectively,

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Cloud is in distant third place at 11%.

Why Alphabet?

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’s mainstream entry into the AI model space with Gemini became a big flop. The company revealed that it prioritizes ideological conditioning of its AI service over the user experience and accuracy. This was not surprising, however, as

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workers had previously described Bard (rebranded Gemini) as “worse than useless” and a “pathological liar.”

But if this was known, and Gemini was rolled out anyway, it indicates to investors a clear lack of leadership. Former

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employee Diane Hirsch Theriault criticized CEO Sundar Pichai as having “lack of visionary leadership” while facilitating an atmosphere of nihilism.

Likewise, that

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“has not launched one single successful executive-driven thing in years”. Nonetheless, the

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ecosystem is expansive, as G Suite holds an estimated 68.66% market share. The generous

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Drive storage space and productivity software comparable to

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’s make a strong base for AI integration.

Now known as

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Workspace and Duet AI (Gmail and Docs), Gemini (Ultra 1.0) is heading for broad ecosystem integration. Yet, it ******** to be seen if

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’s present corporate culture and ideological commitments will sabotage this rollout.

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and Alphabet’s Latest Earnings

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For Q1 2024 earnings in April, Alphabet reported $23.6 billion net income vs. $15 billion in the year-ago quarter, a 57.3% profit boost. For FY24 Q3 in April,

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reported a 20% net income boost at $21.9 billion.

In the cloud arena,

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reported continued Azure gains, with revenue growing by 23% to $35.1 billion year over year. While having a significantly smaller market share,

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Cloud outpaced Azure’s revenue growth at $9.5 billion vs. $7.4 billion in a year-ago quarter, representing a 28% increase.

The bottom line is that

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and Alphabet will likely establish an AI services duopoly, mirroring the dynamic between Nvidia and AMD regarding discrete GPU cards. So far,

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has had a head start with fewer embarrassing errors.

What Do Analysts Forecast?

Based on Nasdaq’s forecast aggregation, the average MSFT price target twelve months ahead is $489 vs the current $400 per share. The average GOOGL price target is $191 vs the current $167 per share. In other words, analysts expect

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(MSFT) stock to appreciate by 22% while Alphabet (GOOGL) is expected to appreciate by 14%.

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’s market cap is significantly larger than Alphabet’s, at nearly $3 trillion vs. $2 trillion, so the market sentiment is clearly in

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’s favor. However, if

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’s leadership undergoes restructuring, this could shift quickly.

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#Clash #Giants #

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#Alphabet #LongTerm #Exposure

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