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Google’s parent company, Alphabet (NASDAQ:GOOGL), soared yesterday, ending the day up 4.6%, after a Bloomberg inform that Apple (NASDAQ:AAPL) You may be looking at Google Gemini. like the AI built into the iPhone. In fact, a potential Apple-Google Gemini partnership on artificial intelligence (AI) could reflect their deal with search, which has come under considerable regulatory scrutiny in recent years.
And while an AI partnership between Google and Apple is sure to draw the ire of antitrust regulators, I see the move as a potentially huge win for both companies as they look to win (more) in the AI race.
With Microsoft (NASDAQ:MSFT) leading the advancement of generative AI with its participation in OpenAI, Apple must find a way to make up for lost time on the AI front. Partnering with Google is a way to catch up with industry leaders like Microsoft. Plus, it may be an easy way to get ahead as Apple gains access to one of the most powerful large language models (LLMs), Google Gemini. With this in mind, I remain bullish on both AAPL and GOOGL.
Apple: Partnering with an AI powerhouse could be wise
While I’m sure Apple could incorporate its own LLM into its devices, I think Google is the best option in this early phase of the AI boom. Because? As good as LLMs have become in recent quarters, they are still not immune to hallucinations (making things up, seemingly out of thin air).
Only time will tell when we will have a robust, hallucination-free LLM ready to hit the market. Still, given Apple’s history of releasing polished products that are really ready to take off, I just don’t see Apple coming forward with some kind of LLM product in the works.
As capable and impressive as they are, even the latest versions of Google Gemini and ChatGPT-4 Turbo are technically works in progress, at least in my opinion.
None of the LLMs are perfect, especially at this point in the AI life cycle when hallucinations still occur regularly. I suppose it could be a while before LLMs are polished enough for errors to become incredibly rare (or perhaps practically impossible).
We may be a few quarters or even a few years away from the error-free AI that many of us envision as some kind of holy grail in AI. However, given how quickly generative AI technologies are advancing (think exponential, non-linear rates), perhaps hallucination-free LLMs are a hell of a lot closer than many of us think.
By now, I think the masses have come to accept that there are bound to be occasional hiccups when using even the best LLM available today. Users of such LLMs can simply check the sources themselves to ensure they are not on the receiving end of a hallucination. In fact, data verification can be a bit complicated when using LLMs like Gemini or GPT-4, but it’s a relatively small commitment. Plus, it’s between that and using an outdated search engine.
What could the future hold for the AI partnership between Google and Apple?
I don’t think Apple has anything to gain by bringing an LLM product to market right now, especially considering that Today’s LLMs are error-pronenegative headlines, lawsuits, public outrage and all kinds of negativity.
However, when the perfect time comes (perhaps when the LLMs are a little more polished), I think Apple might have the option to replace Google Gemini with its own LLM, just like when it gave Intel (NASDAQ:INTC) booting from Mac devices when it was ready to boot on the back of its own Apple Silicon.
In these early stages of the AI boom, Apple will benefit from all the positive aspects of AI by using Gemini without having to deal with the disadvantages. If something goes wrong, Gemini LLM is to blame, not Apple. Meanwhile, expect Alphabet to gain ground as Gemini rolls out to Apple’s gold install base of billions of users.
In fact, Gemini on iPhone could ultimately help Google and Apple overtake Microsoft in the LLM race. It will be interesting to see how a potential partnership between Google and Apple evolves. However, if any deal is signed, I expect GOOGL stock could face a sizable valuation multiple expansion, perhaps closer to that of its top AI peer, MSFT stock, even if Alphabet is forced to pay it to Apple a considerable sum.
Even after rising 4.6% in one day, GOOGL stock still appears to have room to trade at just 25.4 times the price-earnings (P/E) ratio if it’s to catch up MSFT Stock’s P/E Multiple Is 37.7x.
Is GOOGL Stock a Buy, According to Analysts?
Alphabet stock is a strong buy, according to analysts, with 28 buys and eight holds assigned over the past three months. He average target price for Alphabet stock of $165.09 implies an upside potential of 12.3%.
Is AAPL Stock a Buy, According to Analysts?
Apple stock is a moderate buy, according to analysts, with 16 buys, nine holds and one sell assigned over the past three months. He Apple stock average price target of $204.86 implies an upside potential of 16.3%.
The bottom line
It seems like an AI deal between Google and Apple Gemini would be a win for both companies in a bid to advance the generative AI race. It is important to note, however, that all we have is a report of Bloomberg about possible talks between the two companies.
Rumors about rumors mean nothing is set in stone yet, even though recent market action suggests a dotted line has already been signed. In any case, it is to be expected that Apple will go on the hunt for an AI partner as it looks for a “backup” in this still early (and unpolished) stage of generative AI.