Amid the rise of generative artificial intelligence and ChatGPT, many technology investors focus on the battle pitting Google-parent Alphabet versus Microsoft. But Amazon.com and Apple, developers of voice assistants Alexa and Siri that foreshadowed ChatGPT, seem left out of the generative AI spotlight.
Industry analysts say Amazon and Apple stock are lagging in the generative AI race. Amazon has pulled back on marketing smart home devices that use Alexa.
However, Amazon has expanded usage of AI software in its cloud-computing business. And, Amazon uses AI technology throughout its core e-commerce business. That includes customer product recommendations, supply chain management, fraud detection, image recognition and customer service.
Meanwhile, Apple's progress in artificial intelligence has been slow, despite hiring away top AI scientists from Google and others. If Microsoft gains ground with ChatGPT, analysts say it could impact an internet search deal between Apple and Google. That deal provides Apple with billions of dollars in high-margin revenue annually.
What's clear is that Google and Microsoft are making strides in developing their AI businesses — rekindling an ongoing rivalry in the process — as Apple and Amazon try to catch up.
Google Vs. Microsoft In Artificial Intelligence
For Google, the key question is whether it'll lose market share in internet search to Microsoft. Some also wonder if AI chatbot technology in internet search will lower profit margins because of the computing power required.
Investors hope to see increased corporate demand for Microsoft's Office productivity tools enhanced with artificial intelligence. For now, Microsoft seems to be winning the public relations battle in AI.
"Microsoft and Alphabet continue to go back and forth in terms of AI-based announcements, but investors should expect that the revenue benefits from generative AI will be longer-term in nature," Evercore ISI analyst Kirk Materne said in a recent note to clients.
He added: "It is early days in terms of crowning a winner and the reality is that there will be multiple winners as it relates to generative AI."
In addition, Google and Microsoft are among AI stocks to watch.
How This Generative AI Will Be A Game Changer
OpenAI's ChatGPT is only one of several generative AI technologies that could roil a host of industries by creating text, images, video and computer programming code on their own. Further, generative AI technology already is finding applications in a number of areas. They include marketing, advertising, drug development, legal contracts, video gaming, customer support and digital art.
Further, Google on March 21 made its Bard chatbot available in the U.S. and UK. It competes with OpenAI's ChatGPT. Microsoft is OpenAI's biggest investor.
Meanwhile, Apple introduced Siri in October 2011. Amazon's Alexa debuted in 2014. Analysts say voice assistants like Siri and Alexa only provide limited responses to basic queries. They get no training on big databases like ChatGPT.
IBD asked Google's Bard chatbot why ChatGPT is better than Siri and Alexa. Bard stated: "ChatGPT is generally considered to be better than Alexa or Siri in terms of its ability to engage in natural conversations. It is also able to access and process information from the real world."
A Goldman Sachs report put it another way.
"Going off the capabilities displayed by Siri or Alexa, which have become household technologies, generative AI goes further as it has a much more tangible user experience and can process much more complex tasks," the brokerage said in a note to clients. "The big difference between generative AI as a platform and prior platforms is that generative AI learns at a rapid clip and gets better with usage."
Amazon's Hugging Face In Artificial Intelligence
Meanwhile, IDC expects global shipments for smart-home devices overall to decline 2.6% this year to 874 million units.
For its part, Amazon has partnered with AI startup Hugging Face to bolster its cloud computing business. Like OpenAI, Hugging Face has developed large language models, which provide the building blocks to develop AI applications. Amazon Web Services will make Hugging Face's tools available to its cloud customers.
"While AWS may appear to be at a relative disadvantage at the moment, we think they have the potential to be a fast follower in generative workloads," said a recent RBC Capital note.
"While the partnership with Hugging Face gives AMZN access to the models which can be trained and deployed via SageMaker, it could be viewed as a relative disadvantage to GOOGL/MSFT by not owning the models themselves," the report went on to say. "Additionally, beyond Alexa devices, it's not clear they have an intuitive means of distributing a generative AI to get in front of users in a more visible way."
Generative AI To Pressure AAPL Stock?
Meanwhile, most of Siri's developers at Apple have left the company. Apple in 2018 hired away Google's AI chief, John Giannandrea. In 2021, Apple hired another top artificial intelligence scientist at Google, Samy Bengio.
Amid the sudden rise of generative AI, it's not clear what they've accomplished at Apple. According to one report, Giannandrea now oversees Apple Car development.
Further, Apple has a stake in the Microsoft-Google search engine battle. The reason is Google is the default search engine on iPhones. Google pays Apple "traffic acquisition costs," or TAC.
Also, if Microsoft picks up search market share, the Google-Apple deal could be impacted, Barclays analyst Tim Long said in a note.
"The hype of Bing/ChatGPT could pressure Google to bolster the (search) deal with AAPL, maybe at higher rates," Long said. And he estimated that Google paid Apple about $17 billion for search rights on iPhones in 2022.
"Building out an enterprise class search product would be very expensive and time consuming for Apple, but the company has hired several former Google AI and search experts over the years, so it's not impossible to imagine that's being worked on," Long added.
Apple Buying AI Startups
Meanwhile, Apple has acquired a slew of artificial intelligence startups, including Drive.ai and Xnor.ai.
Amid the rise of ChatGPT, Apple stock faces increased pressure to process more AI apps directly on iPhones. That's as opposed to letting users tap Chatbot-type apps be processed remotely in the internet cloud.
For example, Chipmaker Qualcomm is working on AI processing on smartphones that use Google's Android software.
Sridhar Ramaswamy, co-founder and chief executive of internet search startup Neeva and a former Google senior vice president, told IBD that local device processing will improve. Apple now designs its own microprocessors, the brains of PCs and mobile devices.
"IPhones have GPUs built into them for powering things like Face ID," he said in a recent interview. "There can be a lot done locally for certain kinds of applications. Web search might be a different issue given the scale."
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
