the alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG) and meta-platforms (Nasdaq: Meta) are moving full speed ahead when it comes to the artificial intelligence (AI) race, which may not have a clear winner for many years. After all, both of the Big Seven stocks have some of the most interesting and aggressive AI projects today, and are rated strong buyers on Wall Street — rightfully so.
Although the companies come from different corners of the technology sector, Alphabet primarily from search and cloud services while Meta comes from social media and Metaverse, the two tech companies are bound to clash as they tackle AI spending. .
After the initial GPU arms race and launch of the big language model (LLM), both companies can start getting serious about turning up the profit dial as they look to disrupt and challenge new industries. Use technology.
Currently, Google, Meta, and almost every other high-tech firm with a horse in the AI race will be playing from a very similar playbook as they aim to spare no expense with AI. I am bullish on both companies for the next five years as these tech juggernauts trade at less than 25 times forward price-to-earnings (P/E).
Google, the meta AI leaders, but staying ahead will be expensive.
Whether we're talking about getting more Nvidia (NASDAQ:NVDA) Blackwell AI accelerator chips or the huge costs that come with developing next-generation AI applications, Google and Meta know what's on the line and the potential risks of not opening the pocketbook early in this so-called AI boom. .
So far, they seem to be going full steam ahead on technology development, with Meta committing to invest $35-40 billion (up from the original $30-37 billion) on AI by 2024 and Google Putting in more than $12 billion every quarter. That's some serious cash to stay ahead of the pack while the biggest monetization opportunities in these early days are somewhat obscured.
Either way, Meta already seems to be reaping decent returns for AI bets already, with its AI-focused Advantage+ advertiser tools already achieving a $10 billion annual run rate as of February. Moreover, there are other AI profit drivers that are more difficult to quantify — most notably, AI-powered user engagement with content across Meta's family of social media apps.
About 30% of content served to users on Facebook (and 50% on Instagram) was recommended by AI. Of course, Reels, Meta's answer to TikTok, is a big platform where AI recommendations can play a growing role.
As for Google, it's less clear how AI can “cleanse” the company's revenue, as it's likely that Google searchers may move to Gemini or other LLMs over time. .
In any case, I'd argue that the meta has more than enough early signs of success to justify jacking up the AI costs. Perhaps $40 billion could be just the beginning, even if investors will see Zuckerberg pull back a bit to give the stock a bit of a jolt in the near term. I don't think he would, because he seems to be thinking many, many years into the future, whether it's the metaverse or the future state of AI.
AI project for two very “fantastic” companies
As part of Meta's capital spending plan, this is among other investments in data centers, its own AI chip designs (anything to reduce reliance on Nvidia), and its Llama LLM. Expects to invest more. Google is following a similar game plan, with much of its R&D going into its impressive LLM (Google Gemini) and other AI features that stand to improve the Google search experience as we they know.
With Llama and its user-facing meta-AI, it's unclear whether it will take the paid subscription route like Google Gemini. Perhaps Meta can keep things free as it looks to specialize its model and add value to specific industries.
Hollywood stands out as a scene in which Google and Meta can make a huge impact. The two tech juggernauts are reportedly exploring the possibility of a licensing deal for AI-generated video to make it a potentially big hit in Hollywood. Meta's Emo video generation model is pitted against Google's View and OpenAI's Sora. Whether waving the millions will be enough to get major studios to adopt the technology, however, remains to be seen. So far, there have been many rejections from major studios. Maybe that's a good thing.
A “no” today does not mean a “no” forever. As such models become more capable, it may be difficult to prevent AI from changing Hollywood forever. In addition to Hollywood, Google is also setting its sights on journalism, recently unveiling AI tools to help augment journalists. While technology may one day take jobs away from journalists in the distant future, I can't say I'm worried just yet.
Is META Stock a Buy, According to Analysts?
META stock is a strong buy, according to analysts, with 37 buys, three holds, and two sells assigned over the past three months. An average META stock price target of $522.95 implies 12% upside potential.
Is GOOGL Stock a Buy, According to Analysts?
GOOGL stock is a strong buy, according to analysts, with 32 buys and five holds assigned over the past three months. GOOGL stock's average price target of $197.53 implies 14.8% upside potential.
The bottom line
As Meta, Google, and the rest of the tech giants suffer from rampant spending, they focus on enhancing the algorithms that work behind the scenes to increase the value of existing services, particularly advertising. They're adding AI “copilots” to nearly every entry-level and consumer product available. Perhaps things will get more interesting as big tech narrows its sights on specific industries, such as Hollywood and journalism, that AI could disrupt.
Whether AI disrupts these new markets for better or worse is still debated. Either way, big tech has a lot to gain as it builds to automate and augment its powerful AI models. The hope is that AI will enhance and enhance human creativity while attempting to completely replace repetitive tasks rather than completely replace them.
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