With all eyes now on AI, Apple (AAPL) is reportedly in talks with Google (GOOG; GOOGL) to bring the latter's Gemini generative AI technology to the iPhone. According to Bloomberg, the two companies are in "active negotiations" to let the iPhone maker license Gemini, setting the stage for a deal that could potentially shake up the AI industry. Discussing the news report, Wedbush said that a deal would be "a validation moment for Google's generative AI positioning."
AI IN IPHONES: Apple and Google are in active negotiations to let Apple license Google's artificial intelligence engine Gemini into its iPhone, Bloomberg's Mark Gurman reported, citing people familiar with the matter. The two companies are in active negotiations to let Apple license Gemini, Google's set of generative AI models, to power some new features coming to the iPhone software this year, said the people. Apple has also recently held discussions with OpenAI and has been considering using its model, sources told Bloomberg.
If a deal between Apple and Google comes to fruition, it would build upon the two companies' search partnership. For years, Alphabet's Google has paid Apple billions of dollars annually to make its search engine the default option in the Safari web browser on the iPhone and other devices, the author noted.
VALIDATION MOMENT: Following Bloomberg's report saying that Apple and Google are in deep discussions for the latter's Gemini to power Generative AI features coming to the iPhone with iOS 18, Wedbush noted that the report said a deal is yet to be finalized, though it views Google as "a natural choice" for Apple given the two companies' existing agreement that makes Google the default search engine on Apple's Safari web browser.
The firm calls the potential iPhone deal "a validation moment for Google's generative AI positioning." Investor sentiment related to Google's AI ambitions has been volatile in recent months, as investors continue to debate the strength of Google's competitive positioning and the ability for the company to effectively productize its generative AI services. With that said, Wedbush thinks sentiment is beginning to turn more favorable with this morning's news a clear validation of the competitiveness of Gemini and the company's position as an AI beneficiary. The firm has an Outperform rating and a price target of $160 on shares of Google parent Alphabet.
PRICE ACTION: In afternoon trading, class A shares of Alphabet have jumped over 5% to $148.27, while Apple's stock has advanced nearly 2% to $175.09.
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