Google’s parent company stands at a crossroads. An apparent AI market revolution is lurking. ChatGPT OpenAI challenged Alphabet’s core business – search engine advertising. Alphabet’s problems with AI saw the company’s shares fall 17% since early February, but the most recent discovery in the field of quantum computing may be favorable for Alphabet. Is this a good time to buy or sell Google stocks? Will quantum AI bring Alphabet back to the top? Let’s take a closer look.
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With the growing interest in generative AI, Alphabet’s strengths—and many of them—haven’t diminished (AI). The stock has gained over 350% over the previous 10 years due to several factors still in force.
Subatomic particles are studied in quantum physics. Protons, neutrons, and electrons are a few of them that you undoubtedly know at least a little bit about. Quarks, leptons, and bosons are more exotic subatomic particles you may need to familiarize yourself with.
Modern computers employ bits (0 or 1). Quantum computing uses quantum bits, also known as qubits, to exploit particles’ existence in many states. Quantum computers are capable of parallel computation because qubits can be entangled. Due to a combination of these variables, quantum computers can quickly complete tasks that even the best supercomputers of the present day would take years to complete.
Moreover, quantum AI may be far more potent than AI software that runs on conventional processors. Natural language processing, self-driving vehicles, medication discovery, and weather forecasting are some examples of potential quantum AI applications. What does it mean for Alphabet (GOOG.US) stocks?
Google Reaches a Quantum Milestone
Researchers from Google showed they could increase the amount of ‘logical qubits,’ the basic unit of large-scale quantum computers while reducing computation mistakes. The magazine “Nature” was the first to publish the researchers’ results.
Quantum computers can do computations that are beyond the capabilities of conventional computers. However, early prototypes were unstable due to their high error rates.
The timing of this most recent discovery is favorable for Alphabet, Google’s parent company. Others speculate whether Google may lose the AI race due to Microsoft’s (MSFT.US) integration of ChatGPT with its Bing search engine last month and a high-profile failure by Google’s Bard chatbot.
Bill Gates, the creator of Microsoft, warned last week that the launch of ChatGPT will affect Google’s bottom line and upend titans of the digital sector like Apple (AAPL.US) and Amazon (AMZN.US).
In contrast to Microsoft’s around $12 billion in sales, Google Search generated $162 billion in revenue in 2022. 45 Deploying AI is also pricey. A recent Reuters interview with Alphabet’s John Hennessy revealed that an AI-based search query would cost Google ten times as much as a regular search.
Quantum Computing Competition
The leaders in quantum computing are numerous. Towards the top of the list is unquestionably the Alphabet. The company’s Google division has created several frameworks and libraries for managing and using quantum computers in applications. But Google has advanced far further.
Google declared that it had mastered quantum technology in 2019.
Scientists at IBM challenged Google’s assertion, claiming that a supercomputer could fix the issue in 2.5 days by increasing disk storage. Google nevertheless accomplished a significant milestone for quantum computers, even if the IBM team is exemplary.
According to the international consulting company McKinsey & Company, the market for quantum computing might be worth between $300 billion and $700 billion. To put such figures in perspective, consider that Alphabet’s entire revenue for the previous year was $257.6 billion. With the advent of the internet, the world has become a much smaller place, and the world has become more global.
You might be closer to that opportunity than you believe. According to several CEOs, quantum computing will impact many businesses in the next seven years.
A Case For Bears: the Antitrust Threat
It may be decided whether current U.S. antitrust laws are still applicable in the Big Tech industry by a high-profile antitrust enforcement action taken in January by the Antitrust Division of the U.S. Department of Justice against Alphabet Inc.’s Google unit—one of the largest technology companies in the world.
The lawsuit will first test whether the current antitrust rules apply to these brand-new, high-tech marketplaces. More generally, a final court ruling in the case may assist the U.S. Congress in determining whether to update American antitrust laws to address the concentration of the digital market in favor of Big Tech after the previous Congress failed to do so.
According to the federal lawsuit, Google increased its market share by purchasing prospective rivals. Then, it utilized this advantage to play one side against the other in auction marketplaces where advertising space is auctioned to the highest bidder in real time. The Antitrust Division contends that this is not a coincidence. Still, the result of Google actively working to stifle competition to benefit itself.
To address these damages, the agency is requesting that Google and its advertising business be severed from one another by the U.S. District Court for the Eastern District of Virginia. Breaking up a firm is an effective cure but not an unusual move.
Can U.S. Antitrust Law Adapt to the Digital Age?
With outdated instruments, however, would the federal government be able to handle competition issues in these current markets? Ordinary antitrust enforcement in conventional sectors may be handled by U.S. antitrust law, which has roots in the late 19th century and has subsequently been improved by the U.S. Congress and U.S. Supreme Court. Yet the business practices and tactics playing out throughout the U.S. digital technology sectors and beyond are not always tied to the previous uses of U.S. antitrust legislation.
Alphabet Problems With AI: A Conclusion
Maybe quantum computing won’t be a significant business for Alphabet. But I wouldn’t place that wager. In the coming ten years, it will probably be among the top two or three most prosperous quantum computing enterprises, in my opinion. Perhaps, the most significant underappreciated benefit of investing in and holding Google stock is quantum computing, leaving the Alphabet problems with AI behind.
Yet, investors shouldn’t ignore the apparent benefits of owning shares in Alphabet. The business continues to be quite lucrative. It has a ton of money. Several of its products are market leaders in their respective fields. According to its past appraisals, the stock is a steal. Even without its enormous potential in quantum computing, Alphabet stock has many reasons to go up, especially if Fed decides to slow down the interest rate hikes in the near future.
