Apple and Google: A Symbiotic Relationship
The tech world is humming with excitement over the talk of Apple (AAPL) possibly utilizing Google’s generative artificial intelligence (AI) model, Gemini, in its upcoming iPhone. Apple’s CEO, Tim Cook, has hinted at introducing generative AI capabilities this year to revolutionize features and forge new paths for the company.
Apple’s pursuit of innovative technologies comes as a response to the growing demand for fresh growth opportunities from investors. Among Apple’s fierce smartphone competitors like Samsung and Google, the incorporation of Gemini into Apple’s devices is a natural progression given the longstanding partnership between both companies, which has flourished since the inception of the iPhone in 2007. Initially starting with Google Maps for navigation and later evolving into being the default Safari browser search engine, Google’s contributions have played a pivotal role in Apple’s success. This partnership has also proved to be a lucrative endeavor, with reports suggesting that Google pays Apple over $18 billion annually.
The Potential Impact of Apple-Google Collaboration
The inclusion of Gemini in Apple’s iPhones is poised to be a monumental triumph for Google. With over 2 billion active Apple devices and a strong reputation for prioritizing customer privacy, this collaboration offers Google a prime opportunity to expand its reach in the AI space. This move positions Google to potentially surpass its main AI competitor, OpenAI, creators of ChatGPT and backed by Microsoft (MSFT), in user adoption.
Moreover, having the Gemini model integrated into iPhones could prove to be a lucrative venture for Apple as well. While Google currently charges $19.99 per month for its Gemini Advanced app, Apple stands to benefit financially through a revenue-sharing agreement with Google. Despite Apple’s efforts to develop its AI technology like the large language model (LLM) Ajax and Apple GPT, it lags significantly behind Google’s AI advancements due to the lack of substantial server farms required for training sophisticated AI models.
Implications and Potential Future Scenarios
Thus, Apple seeks to lean on a partner like Google to handle the heavy lifting in the realm of generative AI. Ongoing discussions between Apple and Google may culminate in a significant announcement at Apple’s annual Worldwide Developers Conference (WWDC) in June. However, regulatory scrutiny surrounding their partnership in search may pose a hurdle to finalizing the deal.
If the collaboration does materialize, it would mark a substantial win for Google, as it gains access to a vast user base that actively seeks advanced AI features. The inclusion of Gemini in iPhones not only expands Google’s user base but also provides a wealth of data, crucial for enhancing Gemini’s capabilities and product value.
Amidst these developments, Alphabet, Google’s parent company, holds a robust position in various market segments, including dominating global online search, leading mobile search through Android, and maintaining popular platforms like Chrome and YouTube. Anticipated annual revenue growth in cloud services and a surge in digital ad spending further reinforce the appeal of Alphabet stock, making it a compelling investment opportunity under $155.
On the date of publication, Tony Daltorio did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
