Google's Gemini rumored AI Partnership with Apple: A Game-Changer for the Tech Giants and Their Investors?
AInvestMonday, Mar 18, 2024 2:11 pm ET
2min read
AAPL --

In a recent development, Alphabet Inc.'s (GOOG) shares surged over 5% following a Bloomberg report that Apple Inc. (AAPL) is in talks to embed Google's Gemini AI technology into its iPhones. This potential partnership between the two tech titans is seen as a significant move for both companies, addressing concerns about maintaining their dominance in the face of increasing competition in the generative AI space. 

The integration of Gemini AI into iPhones could potentially broaden the application of the AI chatbot, reaching over 1.0 billion active iPhones worldwide. While the deal would be a major win for Google, it would also provide Apple with an opportunity to lead in the development of personalized AI technology, accelerating its time-to-market advantage in the increasingly competitive AI market. 

The partnership comes at a time when both companies are under pressure to maintain their positions in the industry. Google is facing regulatory scrutiny over its payment to Apple for the default search position on iPhones, while Apple's sales in China have been weak, causing a 10% correction in its stock price. 

Microsoft Corporation (MSFT) has been particularly active in the field of generative AI, with its investment in OpenAI and the integration of its ChatGPT-powered search assistant into its Bing search engine. This, along with Microsoft's recent launch of Copilot AI for Windows, has raised concerns about Google's search engine dominance and prompted speculation about Apple's potential partnerships with AI leaders like OpenAI. 

The reported talks between Apple and Google have been welcomed by the market, as they address key concerns for both companies. Apple's pursuit of becoming an AI leader is reinforced through this collaboration, potentially revitalizing its growth trajectory. For Google, the partnership would solidify its position in the Apple ecosystem, granting access to a significant user base and potentially generating substantial licensing fees. However, it is important to note that this collaboration does not eliminate Microsoft's opportunity to challenge Google in the AI market or resolve Apple's underlying challenges with iPhone sales in China.

Google's payment to Apple for maintaining its default search position on iPhones has faced regulatory scrutiny. Both the US Department of Justice and the European Union have investigated this matter. While the adoption of Gemini AI by Apple may provide a temporary countermeasure against regulatory pressures, it remains uncertain whether the potential collaboration could lead to concerns about an AI monopoly in the future. The outcome of these investigations will significantly impact the market dynamics for both companies.

If the deal between Apple and Google materializes, it would be a major win for both companies. Apple could leverage Google's Gemini AI to power new features in iPhone software, enhancing its competitive edge in the AI space. Meanwhile, Google's AI chatbot, powered by Gemini, could gain access to over 1.4 billion partnership active iOS devices. This aligns with Apple's strategic goal of becoming a leader in personalized AI, potentially positioning the iPhone as a game-changer in AI functionality.

The integration of AI chatbots into search engines is disrupting the online search market. With Microsoft's Bing also implementing its ChatGPT-powered search assistant, concerns have arisen among Google investors regarding the potential displacement of Google's search dominance. Microsoft has been vocal about its ambition to challenge Google's leadership position, signaling a possible shift in market share.

Shares of Alphabet ripped higher on the story, breaking above the 50-sma ($143) and pushing to a session high of $152.93 before losing steam. The stock has slipped by and is trading at $148.99, a 5% gain for the session.  Apple is up 2% in reaction to the conjecture. It is battling resistance at its 20-sma ($176.40) as it attempts to clear this level. 

In conclusion, the potential partnership between Google and Apple to integrate Gemini AI into iPhones is seen as a significant move for both companies, addressing concerns about maintaining their dominance in the face of increased competition in the generative AI space. While this is expected to be officially announced at Apple's Worldwide Developers partnership Conference in June, it remains to be seen how the market will respond to this development and whether it will give these tech giants the boost they need to maintain their positions in the rapidly evolving AI landscape. 


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