Google Advances AI Integration, While Apple May Partner with OpenAI to Enhance Siri, Analysts Say

BMO Capital analyst Brian Pitz reiterated Google parent Alphabet GOOGL with an Outperform and a $215 price target.

The analyst said Google I/O contextualized how Alphabet will integrate and monetize over twenty years of AI initiatives and pursue the first big search transformation in as many years with Project Astra. 

Pitz noted, specifically, the monetization of AI Overview improving ROAS, the cost to serve declining 80%, and Gemini integrating at the OS level across smartphones.

Bears likely argued that recent OpenAI multimodal Agent demos are more advanced, but he argued that GOOGL leverages significant scale advantages and ecosystem integration over time.

JMP Securities analyst Andrew Boone reaffirmed Alphabet with a Market Outperform and a $200 price target.

With Google’s AI models able to better understand queries, respond to complex searches, and curate information for users, Boone noted Google can unlock more queries with AI-powered search. The analyst flagged that AI is significantly improving Google’s entire product suite as each of its six products with over 2 billion MAU has integrated AI features.

While he acknowledged the risk of search changing as it goes from a web crawler-based service to an AI model-powered service, which could increase competition and disrupt its distribution with partners, Google’s growing data corpus, compute infrastructure, and deep integrations with over 5 million advertisers can sustain its share of monetizable searches. 

The price target reflects Google’s vast TAM, its scale across search, video, and the cloud, and high profitability.

BofA Securities analyst Justin Post maintained a Buy rating on Alphabet with a price target of $200.

The Google I/O keynote was packed with announcements featuring Gemini integration across Google’s ecosystem, including Search, Workspace, Android, and Assistant, Post said. The event also included the launch of various improved LLMs and 6th-generation TPUs.

The analyst noted that I/O supported his thesis that Google has industry-leading AI/ML capabilities, and the pace of AI innovation has accelerated. As per the analyst, Google is a net AI beneficiary, and growing generative AI (GenAI) integrations should likely drive higher usage and incremental spending across Search, Cloud, and Workspace. 

KeyBanc analyst Justin Patterson reiterated an Overweight rating on Alphabet with a price target of $200.

Patterson came away from Google I/O 2024 impressed by the speed at which Google has made AI accessible for consumers, enterprises, and developers (Gemini is now part of all of Google’s two billion+ user products). AI agent Astra stole the show on how GenAI is revolutionizing assistants, he said. 

Likewise, search generative experience (SGE) is now rolling out into core search as AI Overviews, which the analyst noted suggests both the user experience and cost curves are under control. 

Rosenblatt analyst Barton Crockett maintained a Buy rating on Alphabet with a price target of $182.

The analyst noted that Google’s two-hour I/O developer conference keynote address overviewed the widespread propagation of AI features across Google products and services.

But, on the feature that OpenAI made the centerpiece of its 26-minute AI update presentation the day prior, which involved live audio chat and an AI model with great facility in detecting and conveying emotional tone, Alphabet’s presentation was limited, suggesting a lead for OpenAI right now in that capability.

To his mind, this supports the notion that Apple Inc AAPL could turn to OpenAi to help upgrade Siri and related AI features.

Stifel analyst maintained Alphabet with a Buy and a $196 price target.

Price Action: GOOGL shares traded higher by 1.03% at $172.10 at the last check Wednesday.

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