JP Morgan on Google AI:
We continue to believe GOOGL is well positioned in AI through years of investments across its business lines & it is accelerating efforts around commercialization of LLMs. Bard remains in early test mode, but the original LaMDA based model has since added PaLM, and we believe GOOGL could share more on integration into search at Google I/O in May. While GOOGL did not share a % number, mgmt indicated Generative AI could apply to a broad range of queries & that the company should be able to drive down the cost curve. GOOGL indicated that orgs are already using LLMs in Cloud, Workspace, & cyber security, & we expect these efforts to ramp. Google also believes it is well positioned in AI workload chips through its own TPUs & Nvidia-provided GPUs. GOOGL should also benefit from the combination of the Google Brain Team & DeepMind, with costs now allocated to corporate.
Overall, we don’t think the GOOGL story changes much coming out of earnings. GOOGL will remain long-term focused and let the results of AI and cost controls show up more in future results rather than talk about them in detail beforehand. Conversely, MSFT (covered by JPM’s Mark Murphy) continues to control the narrative on Generative AI & LLMs, & discusses more tangible examples of recent wins. That gap in near-term progress & communication helps drive variance in stock price reaction. We remain Overweight rated on GOOGL. $GOOG