Google stock after the company announced its Gemini AI model

  • Google shares jumped on Thursday, a day after the company announced its latest artificial intelligence model called Gemini on Wednesday.
  • Google executives said Gemini outperforms OpenAI’s GPT-3.5, but the company did not share how it compares to OpenAI’s latest model, GPT-4.
  • Analysts are encouraged by Google’s progress in artificial intelligence, but questions remain about how the company will monetize the technology in the long term.

Sundar Pichai, CEO of Google and Alphabet, speaks about artificial intelligence during the Bruegel Research Conference in Brussels, Belgium, January 20, 2020.

Eve Hermann | Reuters

Google shares rose more than 5% on Thursday, a day after the company announced its latest AI model called Gemini that will compete with OpenAI, Microsoft and Meta products.

The stock is headed for its best day since August 29th. Wells Fargo’s trading desk said the announcement “should be enough to calm the ‘where’s GOOG on AI’ chatter” and that Gemini “clearly triggers a pre-MKT GOOGL show this morning as sell side notes were positive.”

But Wells Fargo’s trading desk also said the big question is what Google’s monetization of Gemini looks like. “In short, I would sum up GOOG as proving that they still have some influence.”

Alphabet has been pressured by concerns about Google’s artificial intelligence capabilities this year, so a “well-branded” competitive model could have positives for consumer search activity and enterprise cloud sales, analysts at Bank of America said on Wednesday.

“We believe Google has strong AI capabilities, and data suggesting Google has best-in-class, proprietary AI capabilities could be positive for stocks in 1H24,” the analysts wrote in a note.

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It’s still unclear what Google plans to monetize Gemini through all of its products in the long term, though it will begin licensing Gemini to customers through Google Cloud later this month.

Google executives said Gemini outperforms OpenAI’s GPT-3.5 chatbot, but the company did not share how it compares to the latest OpenAI GPT-4 Turbo model. However, Gemini shows that there is an opportunity to generate more income from AI.

For example, Microsoft recently launched Copilot, powered by OpenAI’s ChatGPT, built into Word, Excel, and other Office programs, and will cost $30 per person per month. Piper Sandler analysts said in October that Copilot could add up to more than $10 billion in annual revenue for Microsoft by 2026.

While Wall Street “mostly yawned” at Wednesday’s announcement, they were “encouraged” to see Google’s progress on “this major technology shift,” JPMorgan analysts wrote. However, they note that there will be opposition due to “uncertainty about the path to monetization in research.”

“Although it is still early days, the launch of Gemini represents an important innovation for Google as we enter the second year of widespread, commercial availability of generative AI,” the analysts wrote in a note on Thursday.

Analysts at KeyBanc said they view Gemini as the “culmination” of Google’s numerous announcements around AI this year, but believe AI will take time to meaningfully impact its growth and profitability.

“Today’s announcements suggest that Gemini is still making its way into core products like search, so we advise patience in inferring the impact on estimates,” they wrote in a note on Wednesday. “Although we believe 2024 will be more about results than headlines, we also believe it is only just beginning to change the behaviors of advertisers, consumers, developers and enterprises.”

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— CNBC’s Michael Bloom and Jennifer Elias contributed to this report

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