Certainty is a rare thing in the game of markets, but right now I do have a prediction that I can make with some confidence: If you follow financial markets at all and are not already sick of hearing about AI, you will be by the end of this week. With Microsoft (MSFT) and Alphabet (GOOG, GOOGL) reporting Q2 earnings on Tuesday, followed by Facebook parent company Meta (META) on Wednesday, AI will be mentioned so many times in the financial media that, if you are not careful, the term will begin to lose meaning. If you can, though, you should try not to lose sight of the fact that this is one instance where the hype is probably not overdone.
If anything, the potential of computer programs that can draw from the massive amounts of information that exists in digital form around the world, reach logical conclusions based on that information, then rewrite their own code to account for it is even bigger than the constant references to it suggest. If, like me, you are old enough to remember a world without the internet and can therefore appreciate how much its advent has changed lives, you may have some idea of what AI might mean. Those changes have been so fundamental that it is hard to imagine that they have come without a way of fully utilizing the power of centrally stored knowledge, but with it, the possibilities are immense.
What will matter this week for the three companies listed above is not how many times they will mention AI, nor how good they are at explaining how revolutionary it can be for their business. What matters is to what extent they are already offering it to their customers, and if it can be a revenue positive proposition any time soon.
Through that lens alone, META is probably the least important of the three big tech names reporting this week. Despite its size and its attempts to rebrand themselves as more than an ad-driven social media business, that is what it still is at its core. There is nothing wrong with that. Not every social media business is Twitter or Truth Social. Some of them can make serious money. However, it is far more likely that Meta uses AI rather than sells it. If it does develop their own killer program, there is always a chance that Meta will branch out into another area of business.
Restricting AI to internal use or paying for someone else’s AI tech is a more likely outcome for Meta. The company will talk about how they are using it to refine people’s feeds and more accurately target advertising or whatever, but for them, it is a tool to make their existing products and services better, not a product in itself.
For Microsoft and Google, on the other hand, AI technology has the potential to be a marketable product. For Microsoft, the opportunity comes from their association with OpenAI, the developer of the best known generative AI program, Chat GPT. They invested $1 billion in Open AI in 2019 in exchange for an exclusive license on the technology, then announced another $10 billion investment early this year. The most obvious use for them is to create a better, more responsive search engine for their customers. It is something they have been trying to do for a long time, and if Chat GPT gives them a chance of finally doing that, it will be huge.
Right now, their involvement with OpenAI gives MSFT a massive head start, and it will be interesting to hear this week how they plan to leverage that “first to market” advantage. The problem Microsoft has, though, is that Alphabet has their own AI project, DeepMind, and Google’s current dominance of the search market gives them an advantage. They simply have more search data to work with, and that is a big plus for an AI program. What investors should pay attention to this week is how Alphabet intends to leverage that advantage. Are they, for now, focused only on creating a better, even more dominant search business, or are there other plans to commercialize DeepMind?
If you are an investor who, like me, has a sensitive hype sensor, this will be a difficult week. We will hear ad nauseam about AI, about how it will transform all of our lives, and how it is such a massive opportunity for tech companies generally to broaden their reach. What we may hear less about, though — and what you should be focusing on — is how they intend to use it to make money. For investors, that is what counts, and the company that monetizes the technology the earliest and the most efficiently, not necessarily the one that develops the best program, will be the winner of the AI wars.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Image and article originally from www.nasdaq.com. Read the original article here.