BofA analyst Justin Post reiterated a Buy rating on Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG) Google with a price target of $173.
According to reports, Apple Inc (NASDAQ: AAPL) is discussing licensing the Gemini AI platform with Google for integration into the forthcoming iOS 18 software update.
This collaboration is set to enrich iOS with advanced Gen-AI features, including an enhanced version of Siri, Apple's digital assistant, alongside its proprietary AI tools designed for local device operation; Apple's potential partnership with Gemini would introduce more sophisticated generative AI services such as chatbots or image generators, to its ecosystem, the report added.
The negotiation between Apple and Google is yet to be finalized, leaving room for Apple to turn to other AI providers like OpenAI or Anthropic. This move by Apple follows Samsung Electronics Co., Ltd.'s (OTC: SSNLF) announcement that its Galaxy G24 series smartphones will incorporate Gemini to power various AI features within apps such as text messaging, notes, voice recorder, and keyboard.
A deal between Google and Apple on AI could also have significant regulatory implications.
The analyst said it may present a positive development for Alphabet in the context of ongoing Department of Justice (DoJ) search distribution trials and Federal Trade Commission (FTC) AI inquiries.
He added that an agreement suggests that despite legal challenges, Apple and Google foresee continued collaboration in mobile technology licensing and that regulatory scrutiny won't hinder AI licensing advancements.
The financial terms of the potential licensing deal have yet to be disclosed, but he expected that Apple would compensate Google with a technology licensing fee.
The analyst said such a deal would validate Google's AI technology and reaffirm its status as a leading AI provider amid recent AI image generation controversies. Furthermore, he added that a successful agreement could signal enduring cooperation between Google and Apple, affecting their search distribution partnership.
Following the news, Google's stock saw a significant uptick, emphasizing the positive market response to the potential collaboration.
However, there remains a risk that Apple may partner with other AI technology providers.
The GOOG stock gained over 44% last year. Investors can gain exposure to the stock via Vanguard Communication Services ETF (NASDAQ: VOX) and iShares Global Comm Services ETF (NYSE: IXP).
Price Action: GOOG shares traded lower by 0.42% at $147.86 on the last check Tuesday.