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Notwithstanding being considered leaders in the field, alphabet inc., google's parent company, and Microsoft corp. Have lagged in the artificial intelligence industry (ai) this year.
Microsoft and Alphabet have only increased by about 5 percent this year, well behind the nearly 60% increase in Nvidia, according to a Bloomberg report published on
"If you're only buying Microsoft and Alphabet for AI, you might be disappointed by how slowly it rolls out and translates to revenue growth," said Gregg Abella, chief executive officer of Investment Partners Asset Management.
The backdrop for rates is less favourable, and while earnings are strong, they are not as attractive as they were in terms of growth."
While the tech giants' shares tublme, businesses like Nvidia Corp. And c3.ai inc. jumped on the back of excitement about the potential momentum for their company.
Both companies invest heavily in AI, which is costly to create and may not pay for their investment quickly.
AI and inflation
Using AI in research is a priority for Microsoft and Alphabet, although it could be a costly long-term growth engine.
Microsoft has recently introduced a new version of its on-board browser and bing search engine that utilize technology in addition to investing 10 billion dollars in openai chatgpt.
Mother company of google, alphabet, who had previously chosen to integrate AI into the research, noted a decrease in search advertisement demand, Microsoft has warned of a slowdown in business software and cloud sales in its latest quarterly reports.
The prices of their equities have also been affected by the more difficult context for technology equities in general as The result of aggressive interest rate hikes by the Federal Reserve to fight inflation.
However, given their poor performance, Microsoft and Alphabet continue to be the analysts' top picks, with buy recommendations on both stocks coming from almost 90 percent of those monitored by Bloomberg.
Alphabet trades at a discount on nasdaq 100 with a five-year average of less than 16 times the expected earnings. The multiple of microsoft also falls below the five-year average.
The market for artificial intelligence is predicted to expand quickly; according to analysts at UBS Group AG, it will increase from a $36 billion industry in 2020 to $90 billion by 2025, noted the Bloomberg report.
