Microsoft v Google: The battle for AI domination

In a note to clients Tuesday, analysts at Lynx Equity Strategies assessed the battle for domination between Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL)'s Google.

As the Gen AI revolution matures and enters its second year, battle lines for global AI domination are emerging, notes the firm. 

Microso/OpenAI took an early lead via the imminently accessible CoPilot bundle, while Lynx said Google laid out last week a credible case at the I/O event.

"Google can hardly be considered a laggard, a point we had hypothesized two months ago," wrote the firm. "MSFT and GOOGL are likely to continue their traditional Office/browser wars into the Gen AI battlefield."

"On a couple of fronts, though, we do not expect strenuous confrontation. MSFT retains its traditional Office365 userbase and GOOG its Android userbase, we think," they added. 

After its AI product roll-out last week, Google's traditional strength in search is not seen as being at immediate risk. However, Lynx said this is an area the MSFT CEO has stated his intention to make headway.

It's felt that the bulk of the rivalry could be over independent app developers, the ones who are not tied to an Office/GoogleDoc framework or ed to a Windows/Android framework. 

"Up for grabs are API-based Gen AI applications, and this is where one can expect a share shift between Azure and GCP," explains Lynx. 

"The framework for comparison is the same as it always is – functionality and cost. Google announced pricing for Gemini API at a fraction of OpenAI's pricing for GPT-4o APIs," continues the firm.

From a silicon perspective, Microsoft and Google's battle for AI users is "really a bale between NVDA's GPU vs GOOG's TPU," says Lynx. From a cost perspective, the firm's analysts believe the TPU has a clear advantage, but they question whether Google's Gemini offers functional advantages as well.