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Lawsuit against Alphabet isn't that crucial right now. Investors are worried by something else

Let's see what Peter Garnry, Head of Equity at Saxo Bank, said about trends in AI investement in 2023 and Google stock expectations amid US Justice Department second antitrust lawsuit against the company.

What are the trends in AI investment in 2023? Any specific industry investors are seeking? 

AI as a technology has many different branches. The self-driving branch of AI has seen much lower investments over the past year as the technology has been slowing down remaining far from Level 5 autonomy driving. Other branches of AI like the large language models such as the newly released ChatGPT are seeing massive investments and Microsoft's $10bn investment underscores this.  

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The talk about ChatGPT and its potential threat to Google's search engine business is real and has increased the investment risk for Alphabet, but Alphabet's AI unit DeepMind has already proclaimed that it will release this year its competing product to ChatGPT. The technology is in itself revolutionary, but it is patent protected and large language models (LLM) can be copied, which is what DeepMind is pursuing. The real challenge is the engineering part in order to scale fast queries and responses on top of the huge costs of training the LLM. The jury will be out for a long time whether Microsoft overpaid for this technology.

What are the expectations on the Google stocks moving forward, in the context of the U.S. Justice Department second antitrust lawsuit against it?

Alphabet is still a strong business that has doubled its revenue and profits since 2018. Antitrust lawsuits are generally part of the operating environment for large US technology companies and as such it is not something that worries investors.

What worries investors about Alphabet is the general slowdown in the economy that will hit the online advertising business with lower prices, and then ChatGPT from OpenAI which has the potential to uproot Google's search engine business. Microsoft's recent $10bn investment into OpenAI and its ChatGPT technology is seen as an offense move against Alphabet and its Google business. However, Alphabet's AI unit DeepMind has already proclaimed that it will release its competitor to ChatGPT so the impact from ChatGPT on Alphabet's businesses might be limited, but the risks have definitely gone up for investors in Alphabet.

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Peter Garnry

Garnry developed Saxo Bank’s Alpha Picks which is a monthly publication selecting the most attractive stocks across the US, Europe and Asia. He also contributes to the Saxo Bank Quarterly Outlooks and the annual Outrageous Predictions and is a regular commentator on television, including CNBC and Bloomberg TV.