Shares of Google closed up 5% on Thursday a day after the company announced the launch of its latest artificial intelligence model, called Gemini, that will compete with products from OpenAI, Microsoft and Meta.
The stock is on track for its best one-day performance since Aug. 29. Wells Fargo's trading arm said the news "should be enough to quell the rumors of 'where Google is in AI,'" while Gemini "apparently sparked pre-market buying for Google this morning, as the selling side showed positive signals." ”
But Wells Fargo's trading department also said the biggest question was how profitable Google was at Gemini. "In short, I think Google has proven that it still has some influence. ”
Analysts at Bank of America said on Wednesday that Alphabet has been facing concerns about Google's artificial intelligence capabilities this year, so a "well-branded," competitive model could be good for its consumer search activity and cloud enterprise sales.
"We believe Google has strong AI capabilities, and data shows that Google has best-in-class proprietary AI capabilities, which could be positive for the share price in the first half of 2024," the analysts wrote in a note. ”
It's unclear if Google plans to monetize Gemini across all of its products in the long term, though it will license Gemini to customers via Google Cloud later this month.
Google executives say Gemini outperforms OpenAI's GPT-35 chatbots, but the company did not disclose how it compares to OpenAI's latest model, the GPT-4 Turbo. Still, Gemini shows that there is an opportunity for further monetization of AI.
Microsoft, for example, recently launched Copilot, powered by OpenAI's ChatGPT, which is embedded in Word, Excel, and other Office software for $30 per person per month. Analysts at Piper Sandler said last October that Microsoft's Copilot would generate more than $10 billion in annualized revenue by 2026.
Analysts at JPMorgan wrote that while Wall Street was "mostly yawning" on Google's announcement on Wednesday, they were "encouraged" to see the company's progress on "this major technological shift." However, they noted that there will be headwinds from the "uncertainty surrounding search monetization paths".
"While it's still early, the launch of Gemini represents a major innovation for Google as we enter its second year of commercialization and widespread distribution of generative AI," analysts wrote in a note Thursday. ”
Analysts at Keybanc said they see Gemini as the "peak" of Google's many AI announcements this year, but they think it will take some time for AI to have a meaningful impact on Google's growth and profitability.
Today's announcement suggests that Gemini is still moving into core products such as search, so we recommend being patient when extrapolating the impact. "While we think 2024 will focus more on results than headlines, we also believe it's still in its infancy when it comes to changing the behavior of advertisers, consumers, developers and businesses." ”