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Apple’s (NASDAQ:AAPL) generative artificial intelligence offerings are unlikely to be disruptive to “broad-based search,” Morgan Stanley said on Tuesday, thus cementing its belief that Google’s (NASDAQ:GOOG) (NASDAQ:GOOGL) core business is safe for the time being.
Google shares were fractionally higher in premarket trading.
“In our view, the use cases presented by AAPL do not appear to present a disintermediation threat to broad-based internet Search (i.e. GOOGL Search) or commercial query search,” analyst Brian Nowak wrote in an investor note. “For now, we see the new Siri and Apple Intelligence products as a native AAPL assistant with still limited capabilities…though the OpenAI partnership will help AAPL scale Siri’s responses to deliver answers to questions that fall outside of AAPL’s iOS ecosystem and API integrations represent the potential to expand functionality to [third-party] apps. Further, the adoption is likely to take time as the product goes into beta later this year, in U.S. English, with some features coming in ’25…and with Apple Intelligence only available to iPhone 15 Pro and iPhone 15 Pro Max users as well as iPad and Mac with M1 and later. This, in our view highlights GOOGL’s time to develop/roll out more of its own products…and the still-deep moats around powering a high utility “broad-based search offering.”
Nowak has an Overweight rating and a $195 price target on Google.
Additionally, Google seems to be in a better position to win the AI assistant race, given that it has six apps with 2B or more users; 15 services that have 500M users; and “multiple” vertical-specific data sets, such as the shopping graph, YouTube, Maps, Gmail and more.
“We think this combination of leading technology and large, often-updated data sets gives GOOGL an advantage in building a next generation personal assistant detailed,” Nowak added.
Google, Apple AI partnership?
Apple’s AI partnership with Microsoft (MSFT) backed OpenAI received significant attention. However, Apple said support for other AI models will come “later,” which suggests that Apple is “more likely than not” to use Google Gemini at some point, Nowak said.
“In our view, a confirmation of an AAPL/Gemini partnership is likely to be positive for GOOGL shareholders as it would confirm GOOGL’s position in AAPL’s stack of GenAI tools,” Nowak said.