Analysts at Pivotal Research warned in a recent note to clients that should ChatGPT-maker OpenAI may cut its spending or face other issues due to its mounting obligations. “It is likely to temporarily get pretty ugly for AI stocks and the market in general,” warn analysts in the research note. “We believe the shakeout, if it happens, will mirror 2000 and will inevitably be a healthy weeding out process leaving fewer much more dominant competitors, with Google leading the way,” says the note.Pivotal analysts expects Google Gemini to gain market share against OpenAI. Google’s partnership with Apple AI is likely to accelerate gain in Gemini’s marketshare over ChatGPT. The research firm’s note suggests that this trend could put pressure on OpenAI by 2026, potentially forcing the competitor to reduce capital expenditures due to “massive obligations and likely falling OpenAI share.” Pivotal Research also points to Google’s TPU (Tensor Processing Unit) technology as offering “a sustainable competitive advantage” that could become a significant value driver through sales to outside parties and potentially taking market share from Nvidia. Pivotal Research Group analyst Jeffrey Wlodarczak reportedly believes that Google’s tensor processing units could become a “material driver of value” as Google sells its chips to third parties. In October, Anthropic struck an agreement with Google to access up to 1 million TPUs. Last month, a report from The Information suggested that Meta Platforms (META) is in talks to spend billions on Google’s chips. According to the report, Google Cloud executives said that the company’s TPU business could generate up to 10% of the annual revenue that Nvidia does. Wlodarczak believes Google’s semiconductor advancements could take share from Nvidia and drive down the cost of its chips.
Pivotal Research raises Google stock price target
Pivotal Research has raised its price target on Google-parent Alphabet stock to $400 from $350 while maintaining a ‘Buy’ rating, citing continued momentum in the company’s core business lines. The research firm highlights Alphabet’s search business as a “resilient cash cow with pricing power” that drives the company’s Gemini AI technology. Pivotal notes that as Gemini takes search share, the economics with device manufacturers improve compared to traditional search partnerships, potentially boosting margins. This aligns with Alphabet’s strong financial performance, with revenue reaching $385.48 billion and growing at 13.42% year-over-year.“Google appears to be the best positioned of its peers to monetize AI investment internally and externally,” Wlodarczak wrote, citing the success of Gemini, the core search business and the custom silicon business.
