As one of the world's leading technology companies, Alphabet (GOOG 0.37%) (GOOGL 0.35%), Google's parent company, has been at the forefront of many technological innovations.
Lately, one area where Alphabet is particularly well positioned to succeed is in the field of artificial intelligence (AI), thanks to its significant investments in AI and machine learning technologies.
In this article, we will explore how AI will impact Alphabet's business and the opportunities for the company due to these advancements.
Better user experience and monetization opportunities
While AI will impact Alphabet's business in many different ways, the immediate improvement will be on its existing offerings.
Using AI and machine learning technologies, Alphabet can offer users more personalized and relevant experiences, increasing engagement and usage of its existing products, including search, YouTube, and others.
An improved user experience, in turn, will keep users coming back for more of its services. A happy customer cohort will, ultimately, benefit Alphabet's monetization efforts -- think advertising.
AI will also have a more direct impact on Alphabet's advertising business. For example, by using machine learning algorithms to target ads more effectively to users, Google can increase the efficacy of its advertising, leading to higher click-through rates (and ad revenue). So advertisers get more exposure, individual users receive more relevant ads, and Google gets more revenue. A win-win for all parties!
AI and cloud computing
If the impact of AI on Alphabet's advertising business is massive, then the effect on its cloud business could be game changing.
By incorporating AI technologies, Google Cloud can offer its customers more sophisticated and personalized services. For example, the cloud operator can provide a range of machine learning (ML) services that enable organizations to build, train, and deploy their ML models without requiring AI or data science expertise. With these personalized ML models, companies can enhance their services and products and improve operational efficiency.
Besides, Google Cloud's AI capabilities can provide enhanced security and threat detection, which is increasingly important as businesses face more advanced cyber threats. On top of that, by leveraging AI in big data analytics, the tech company can provide customers with more sophisticated data analysis capabilities and help them gain deeper insights into their operations, customers, and markets.
In short, by equipping its platform with advanced AI capabilities, Google Cloud is well positioned to capture a larger share of the cloud computing market in the future. From 2020 to 2022, the company's global cloud computing market share grew from 7% to 10%.. This trend could continue in the coming years as it further leverages AI in its cloud offerings.
Launching revolutionary products and services with AI
Alphabet's investments in advanced AI could also open up entirely new business opportunities.
The development of its self-driving car technology, which relies heavily on advanced AI algorithms to interpret and respond to real-world driving scenarios, is an excellent example. While it's still early, Alphabet has incorporated Waymo, a leading self-driving car business, to develop further and commercialize its self-driving technologies.
Another example is its life science subsidiary, Verily Life Science, which uses AI to analyze large amounts of medical data to develop new treatments and cures for various diseases. By leveraging machine learning algorithms, Verily can identify patterns that would be difficult or impossible for humans to detect. And as AI technologies continue improving, Verily could develop more effective and targeted treatments, revolutionizing the healthcare industry.
While it's too early to declare victory for these young ventures, it will be interesting for investors to watch how these investments unfold in the coming years.
Alphabet is the stock to watch in the coming decade
Alphabet's investment in AI and machine learning technologies has positioned the company for success in multiple areas.
Alphabet can leverage AI technologies to improve its core offerings, such as search and cloud computing. Additionally, AI has the potential to open new income streams for the company, revolutionizing industries such as healthcare and transportation.
As AI evolves, Alphabet's focus on this technology will likely pay dividends in the long run.
