The tech world has been abuzz this week with news that Google open-sourced its artificial intelligence (AI) engine called TensorFlow. This news — despite the fact that there’s no immediate impact on shares of Alphabet (GOOGL, GOOG) stock — is notable on both logical fronts: the trend toward open-source and the trend toward AI.
Regarding the former, Popular Science summed up the strategy’s track record:
“Google laid the groundwork to dominate the mobile market by releasing Android, an open source operating system for phones. Eight years later to the month, Android has an an 80 percent market share, and Google is using the same trick—this time with artificial intelligence.”
That segues nicely into the latter. Google is focusing heavily on artificial intelligence these days — but not with the goal of dominating the market itself. Instead, it’s using the technology to further dominate markets it already, more or less, controls.
Bloomberg noted as much in coverage of the company’s most recent earnings report, writing:
“When Google-parent Alphabet Inc. reported eye-popping earnings last week its executives couldn’t stop talking up the company’s investments in machine learning and artificial intelligence. For any other company that would be a wonky distraction from its core business. At Google, the two are intertwined.”
What Is Google Doing With AI?
The company’s machine learning and artificial intelligence technology is being used to improve it search engine — the core Google offering — but also to offer features such as automatic email reply for Gmail and automatic identification within Google Photos … and, of course, to work on big-time breakthroughs (e.g., self-driving cars).
This breadth of applications is precisely why Google will continue to be a leader in the artificial intelligence space. While countless Silicon Valley companies are working on machine learning, the technology to digest, break down and then use data for future decisions (in a super-simplified nutshell) is often built separate from specific and profitable applications.
In the world of Google, the tools, the products they’re applied to and the business model behind each are largely intertwined and established. As such, the company’s lead in artificial intelligence makes its competitive moat even wider.
Bottom Line on Artificial Intelligence and Alphabet Stock
This takes the bull case for Alphabet stock and adds some appealing long-term potential. Shares of GOOGL have already gained 40% so far this year, and have gained a delicious 144% over the last five years.
That run is largely thanks to this forward-looking focus and ongoing innovation. But, it’s always nice to be assured that the company isn’t resting on its laurels, especially considering the rapid pace of the tech world.
Machine learning — which Facebook (FB) and other tech stalwarts are also investing heavily in — will undoubtedly play a large role in the future of the technology industry. The fact that Google is staking out its place at the top of the AI class is promising, to say the least.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
