Amazon (AMZN -1.07%) and Google parent Alphabet (GOOG 0.05%) (GOOGL -0.01%) show up on nearly every list of leaders in artificial intelligence (AI). And rightly so.
The conventional wisdom is that both are poised to be huge winners with the AI boom. But does AI instead spell doom for Amazon and Google? Bill Gates thinks so.
Goodbye, online search and shopping
Gates spoke this week at Goldman Sachs' and SV Angel's AI Forward 23 event in San Francisco. The Microsoft (MSFT 0.45%) co-founder predicted that the future of AI is in personal digital agents.
These personal digital agents will be able to perform a wide variety of tasks for people, according to Gates. He even thinks that the forthcoming AI tools could eventually understand how humans think and feel, and what they want.
The potential impact if Gates is right could be enormous. He said, "Whoever wins the personal agent, that's the big thing, because you will never go to a search site again, you'll never go to a productivity site, you'll never go to Amazon."
Gates isn't alone in envisioning a future that could disrupt the business models of some of the current tech giants. Ark Invest CEO Cathie Wood also recently predicted that Google could be in big trouble as the result of new AI applications such as ChatGPT.
No worries?
Investors don't appear to be worried by the gloomy predictions by Gates and others. Amazon's shares have soared nearly 40% so far in 2023. The big gain has been fueled in large part by excitement about the impact of AI on the company's business.
Meanwhile, Alphabet's stock has been an even bigger winner. Some were initially concerned that Google had been caught off guard by the launch of ChatGPT, but the company responded quickly. Its shares have skyrocketed more than 40% year to date.
But Gates' predictions shouldn't be summarily dismissed. In 1995, he wrote about the likely development of a mobile device that would allow users to send email, play games, and more. That was years before the launch of the first smartphone.
In 1994, Gates talked about a future where people could watch movies whenever they wanted, and that computer algorithms would recommend what to watch based on their preferences. Netflix began offering its streaming service 13 years later.
The multibillionaire also predicted digital music, smart homes, social media, and telehealth well before the technologies became widely adopted. On the other hand, he has also had a few big misses, including initially seeing "little commercial potential" for the internet.
Boom instead of doom
Are Amazon and Google doomed if Gates is right about personal digital assistants disrupting online search and shopping? Not necessarily.
One or both of these companies could be a leader in the AI future that Gates envisions. Both Amazon and Google already market virtual assistants. They're both investing heavily in developing AI technology.
Gates himself acknowledged that there's a 50% chance that the biggest winner in AI will be a tech giant. He's hoping that Microsoft could be it. However, he has also said that he is "impressed with a couple of start-ups."
Of course, any start-up that makes especially significant progress could find itself an acquisition target by one of the big tech companies. Amazon, Google, Microsoft, and a few others have ample financial resources to make enticing offers to a promising up-and-comer.
It's also possible that the AI assistants that Gates predicts could supplement rather than supplant Amazon's e-commerce business and Google Search. Those business models could adapt and evolve as new AI technology is introduced. Don't forget, either, that arguably the biggest AI opportunity for Amazon and Google is with their cloud units.
Gates' prediction of a future where no one uses Amazon shopping and Google Search could come true. But betting on these two AI stocks -- instead of against them -- looks to be the smarter strategy right now.
