Stunning Win-Win Deal For Top Magnificent 7 Stocks

In stunning news announced earlier this week, Apple revealed that it is looking to partner with Alphabet to allow Google’s Gemini to power iPhone AI features.

The announcement was stunning on numerous counts. Notably, both stocks ended the trading higher on the news. That fact alone suggests that the market interprets the deal to be a win-win. With that said, Google was the clear winner, popping over 5% on the day.

The clear takeaway was that Google has a meaningful and perhaps unassailable advantage in artificial intelligence.

Key Points

• Apple’s potential licensing of Google’s Gemini AI technology for iPhone features marks a strategic pivot, highlighting the urgency of AI innovation.
• The market’s positive response, especially Google’s stock surge, underscores its dominant position in AI. 
• This move is expected to enhance margins for Alphabet, affirming both companies as essential long-term investments with potential for growth.

Apple Boldly Embraces AI

The potential partnership further cements the relationship between the two firms. Already Google pays Apple tens of billions to be featured as the default search engine.

With this news the tide has turned and it appears that Apple will be relying on Google’s software lead, which may entail licensing Google Gemini for GPT. For a company like Apple that traditionally keeps development in-house, the news implies that leadership at Apple see how imperative timeline is to innovating in the AI space.

So too does it reveal that Google’s long-term advantage in AI, first purchasing DeepMind a decade or so ago, is not going to be ceded anytime soon. Given Apple’s massive customer base, Apple sees speed to market to serve its vast customer base as more important than attempting to compete.

No doubt, the deal is going to run into obstacles surrounding privacy and data rights. Likely, Apple will launch personalized AI features to address many of the privacy issues.

Further credence to how seriously Apple is taking AI is evident from its decision to re-deploy resources from the canceled Apple Car project.

What It Means For Apple & Alphabet?

A licensing deal between the two Magnificent 7 titans is unlikely to be a short-term partnership but could extend for the foreseeable future, which in turn means a highly predictable flow of revenue for Google, which should fall largely to the bottom line, and explains away its higher share price pop.

So too however is the deal likely to be margin acretive to Apple, which can be long-term competitive in artificial intelligence, even if short-term the financials are pressured.

As Apple transitions from a hardware-centric focus to embrace AI more, it highlights a tectonic shift in Apple’s DNA to evolve with the changing times.

For investors, no change in long-term outlook has materialized. Both have wide moats that are likely to widen further on the news, and both remains stocks not to trade, but to own for the very long-term. Or in other words, pullbacks can be bought, and both stocks will likely continue to rewards investors who deploy capital steadily to them over time.