Apple’s ascent to a trillion-dollar valuation once seemed unassailable. It was a beacon of financial prowess, achieving milestones with ease and setting the standard for the future. Yet as of late, Apple has wrestled for the crown, trading places with Microsoft, the current market cap leader hovering at over $3.01 trillion, as Apple sits at $2.87 trillion. Now, a Wall Street analyst contends that this may be the new norm, with two contenders gearing up to surpass Apple’s valuation in the years ahead.
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The Ascendancy of Artificial Intelligence (AI)
In the latter part of 2022, a significant leap forward in artificial intelligence (AI) capabilities surprised many. Although AI has been present in various forms for decades, 2023 marked a pivotal shift in the technological landscape. The emergence of generative AI ushered in a new era, enabling the creation of original content from minimal user inputs and automating repetitive tasks, thus enhancing overall productivity.
Microsoft was quick off the mark, investing $13 billion in OpenAI and integrating AI tools into its Software as a Service (SaaS) suite, including the innovative Copilot, offering over 150 features aimed at time-saving and productivity enhancement.
Alphabet also made rapid strides with its Pathways Language Model, culminating in the launch of Gemini, described as “Google’s most capable AI model yet,” outperforming existing benchmarks in language model research.
In the same breath, Amazon unveiled Q, an AI assistant tailored for its Amazon Web Services (AWS) cloud users, and made a significant investment in Anthropic AI, an OpenAI competitor.
A common theme emerges as Microsoft, Google, and Amazon — often referred to as the “Big Three” cloud computing providers — take center stage in this AI revolution.
A Strategic Edge
Last year, Needham analyst Laura Martin stressed the advantages held by the trio of cloud infrastructure providers, Microsoft Azure, AWS, and Google Cloud, in the realm of generative AI. She emphasized their potential to capture a share of every new generative AI application, positioning them as the gatekeepers of Language Model Models (LLMs).
Claims are substantiated by statistics indicating that approximately 60% of corporate data resides in the cloud, with an estimated 98% of global corporations utilizing cloud storage, placing these providers in an advantageous position to capitalize on AI’s growing adoption.
While Apple is also delving into AI, focusing on safeguarding its iPhone user base, the lion’s share of its revenue is derived from iPhone sales, thus acknowledging the superior position of Microsoft, Google, and Amazon in the evolving AI landscape.
A Multitrillion-Dollar Prize
Projections on the market potential of AI vary, with conservative estimates valuing its impact at $1 trillion over the next decade. Moreover, Amazon, Microsoft, and Alphabet are trading at relatively low forward earnings multiples, making them attractive prospects given the expansive opportunities on the horizon.
The convergence of AI capabilities with their existing businesses and the potential to offer AI services through their widespread cloud infrastructure positions these companies at the forefront of a thriving AI marketplace.
As the stage is set for Amazon, Microsoft, and Alphabet to step into the future, one can only wonder — will they shape the next era of technological evolution?
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Alphabet, Amazon, Apple, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Check Point Software Technologies, and Microsoft. The Motley Fool has a disclosure policy.
