The AI battle has just begun, will Alphabet-C lead or catch up?

The struggle for AI dominance is in full swing, with Microsoft and Alphabet-C parent company Alphabet-C-C leading the way.

A new set of AI features from Alphabet-C may help prevent Microsoft from invading the search engine, but analysts still believe that Alphabet-C-C is primarily on the defensive.

Alphabet-C announced a series of generative AI features on Wednesday. Wall Street analysts seem to believe that the company is capable of maintaining its dominant position in the search engine field and fighting against Microsoft's Bing.

How do analysts view this?

Oppenheimer analyst Jason Helfstein wrote in a research report, "We believe that this demonstration largely alleviates investors' concerns about Alphabet-C's lack of AI innovation, especially compared to Microsoft and OpenAI."

Oppenheimer analysts said there is little evidence so far that Alphabet-C's search volume has been affected by AI chatbots.

Data from market research firm Statcounter shows that Alphabet-C's market share in April was close to 93%, while Bing was close to 3%, almost unchanged from the same period last year.

Oppenheimer maintains a outperform rating on Alphabet-C-C stock with a target price of $145.

However, this AI war seems to go far beyond search engines. Alphabet-C said its next-generation large language model, PaLM 2, will power 25 products and compete with Microsoft-supported OpenAI GPT-4 models.

Wedbush's Dan Ives wrote, "We still believe that Microsoft's early investment in ChatGPT changed the game and gave it a crucial lead in the field of AI... Alphabet-C is now in a catch-up phase."

Cloud business competition?

Alphabet-C will focus on the integration of AI and cloud computing services, and Alphabet-C-C is currently ranked third in the field of cloud computing services. Microsoft hopes that the development of its AI can help it challenge Amazon AWS in the cloud business.

Macquarie Research analysts also believe that Alphabet-C is trying to "keep pace" with Microsoft in the field of cloud computing.

They pointed out that Alphabet-C announced a strategic partnership with the software development platform Replit at the end of March, which seems to be a response to Microsoft's integration of AI coding tools on its GitHub platform.

The improvement of coding efficiency by AI tools is one of the most remarkable applications of this technology to date.