BofA Securities analyst Justin Post reiterated Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) with a Buy rating and a $200 price target.
At the WWDC, Apple Inc (NASDAQ: AAPL) announced a series of new Al features for iPhone and a partnership with OpenAI, integrating ChatGPT access into various features within the latest iOS 18, Post highlighted.
Most importantly, Apple's plans to add support for other Al models in the future possibly left the door open for Google's Gemini or Anthropic to be added as options, as per Post.
From an Alphabet investor perspective, there have been concerns that any deal between Apple and Open AI could negatively affect Alphabet stock, Post noted, opening the door to increasing AI usage as an alternative to search.
Alphabet's stock closed slightly higher for the day, with a lack of impact from the Open AI partnership announcement, possibly due to the deal scale or AI capabilities being smaller than expected. Furthermore, Post said that Apple's statement about expanding support to other LLMs also opens up the possibility of integrating Gemini into iOS to handle some AI activity or more specialized tasks.
Nonetheless, the analyst noted that new technology partnerships for iOS are an ongoing concern for Google's long-term competitive moat, and the fears could elevate if OpenAI launches a search product in the second half of 2024.
Post remains constructive on growing Gemini integration across the Google ecosystem and think broader AI overviews rollout could drive higher search usage & opportunities for incremental ad spend on the platform. Also, with an ongoing expense focus, Google is still quietly managing costs; Post noted an opportunity for margin and EPS upside to Street estimates in 2024.
Price Action: GOOGL shares traded higher by 0.06% at $176.74 at the last check Tuesday.