Citi analyst Ronald Josey reiterated a Buy rating on Alphabet Inc (NASDAQ:GOOGL) with a price target of $153.
Google Cloud Platform’s (GCP) GenAI tools and offerings were the focus at Google Cloud Next ’23. Given the capabilities of Vertex AI, Duet AI, and its Model Garden with 100+ foundational models available (including Meta’s Llama 2), the analyst believes Google is successfully leveraging its core GenAI capabilities to build a more competitive GCP.
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The analyst was impressed to hear that demand for GCP’s Vertex GenAI Projects rose +150x from April to July and that Vertex AI customer accounts rose +15x in 2Q. And with 10 million+ Google Workspace customers and Duet AI’s integrated launch across Workspace and GCP, Josey believes Duet AI’s $30/month subscription could be material over time.
With Google Search Generative Experience (SGE) creating a more engaging experience, GCP leveraging Google’s AI investments with monetizable Cloud offerings, and newer GenAI products on the horizon with its Gemini LLM and AI-powered ad products like Automatically Created Assets.
KeyBanc analyst Justin Patterson maintained his Overweight rating and $145 price target.
Continuing the theme of 2023, AI featured heavily across presentations and announcements at Google Cloud Next.
Whereas most investor focus has deservedly centered around opportunities and threats for the core Ads business, he believes scaling Cloud remains a crucial swing factor toward medium-term revenue and EPS revisions.
Google continues to emphasize flexibility through the use of TPUs and GPUs. The Company announced the Cloud TPU v5e (now in preview) and that A3 VMs, based on Nvidia Corp’s (NASDAQ:NVDA) H100 GPUs, will be available starting in September.
Additionally, Google announced GKE Enterprise (enables multi-cluster horizontal scaling), Cross-Cloud Network (connects and secures applications across clouds), and Google Distributed Cloud (runs workloads at the edge or in the data center)
Patterson remains comfortable with Google Cloud’s positioning. He views Google Cloud as sustaining mid-20% Y/Y growth through 2025 through the strength of the AI product cycle. As Cloud revenue and profitability ramp, the analyst sees Cloud bolstering valuation.
JMP analyst Andrew Boone maintained a Market Outperform rating and a $138 price target.
Boone’s key takeaway from the event is that while it still clearly remains early for AI, Google showed progress in solving key enterprise pain points (with Vertex AI) as it announced products to reduce hallucinations and embed organizational data and tone into responses, and assurances that data will be siloed for enterprises and not used to enhance Google’s models.
For AI, more broadly, he views Google Cloud Next as one of the most public product roadmaps for moving AI into everyday applications and workflows.
With Google showing progress in productizing its AI advancements, he became more convinced that AI can drive technological evolution over the next decade.
He continues to view Google as a leader in AI with benefits accruing to GCP, more relevant search, and cost efficiencies.
GOOGL Price Action: GOOGL shares traded higher by 1.13% at $137.03 on the last check Wednesday.