Google's 'Cannibalization' Risk Vs Microsoft's Azure Growth: Expert Explains How AI Answers Could Slash GOOG's Ad Revenue

Core Insights - The AI race is intensifying, with market analysts divided on the prospects of tech giants, particularly highlighting the potential negative impact of generative AI on Google's core advertising business while favoring Microsoft's cloud growth [1] Group 1: Google's Challenges - Google faces an existential threat as it must disrupt its own profitable business model to remain relevant, with generative AI providing direct answers that reduce the need for users to click on search links [2] - The introduction of AI-generated answers is cannibalizing Google's business, as users are less likely to click away to other sites when presented with AI results compared to traditional search results [3] Group 2: Microsoft's Advantages - Microsoft is viewed as a safer investment heading into 2025 and 2026, with significant AI upside through its Azure cloud platform, which has recently experienced 35% growth, without the same internal disruption risks as Google [4] - Core profit engines like Windows and Microsoft 365 are unlikely to be disrupted by AI in the near term, positioning Microsoft favorably in the market [5] Group 3: Infrastructure Investment Opportunities - Both analysts agree that the immediate investment opportunity lies in the infrastructure buildout required to support AI, with a focus on spending towards data centers, networking, and power [6] - Specific recommendations include Micron Technology Inc. and Lam Research Corp. as beneficiaries of the increasing demand for DRAM memory needed for large AI models [6] Group 4: Stock Performance - Alphabet's Class A shares have surged by 76% over the last six months and 65% over the last year, indicating strong market performance despite the challenges posed by generative AI [9]