The impact of artificial intelligence (AI) will once again dominate the earnings reporting season as the technology sector prepares. All publicly traded IT businesses will be strongly impacted by the hoopla surrounding AI, according to Morgan Stanley analyst Brian Nowak. However, Google and Meta Platforms are anticipated to be the two businesses most impacted.
Google [GOOGL] is scheduled to report its fiscal second-quarter results on July 25th. The search engine giant is expected to be one of the most affected companies in the tech industry due to AI. According to Nowak, the immediate impact of AI on Google search won’t be as deep, but it’s expected to be significant in the long-term.
Nowak has identified three factors that he believes will put Google in the best position to disrupt and improve its business. These are:
Google has access to vast amounts of data, which it can use to train and improve its AI algorithms. This data includes user behavior, search queries, and click-through rates, which Google can use to create more personalized search results.
Google has some of the best AI talent in the industry. The company has invested heavily in AI research, and it has a team of experts working on developing new AI technologies.
Google has built a robust infrastructure that can handle the vast amounts of data required for AI. The company has invested heavily in building data centers and network infrastructure that can support its AI algorithms.
Nowak believes that AI will fundamentally change the way we interact with Google search. The search engine will become more personalized, providing users with more relevant results based on their search history and behavior. AI will also enable Google to provide more accurate and relevant answers to complex queries, making it easier for users to find the information they’re looking for.
Meta Platforms [META], formerly known as Facebook, is another company that’s expected to be significantly impacted by AI. Meta is tying its pursuit of the metaverse to AI, which Nowak believes will have a significant long-term impact on the company.
Meta is expected to integrate large language models into its applications to drive new capabilities for users and advertisers. However, according to Nowak, changing behavior and material success are less certain, and online advertising doesn’t have to be a zero-sum game.
Nowak advises investors to remain focused on the fundamental earnings power of companies, even as AI changes continue to unfold. Adoption curves for AI technologies are often not steep or straight lines. Therefore, companies must focus on their core business and fundamental earnings power to succeed in the long term.
The impact of AI on Google search and Meta advertising will be significant in the long term. Google’s dominance in search, vast amounts of data, top AI talent, and robust infrastructure put it in the best position to disrupt and improve its business. Meanwhile, Meta Platforms’ pursuit of the metaverse and integration of AI will have significant long-term impacts on the company. Despite the hype around AI, it’s essential for investors to focus on the fundamental earnings power of companies to succeed in the long term.
First reported by MarketWatch.
Olivia is the Editor in Chief of Blog Herald.