Google Stock and Google Cloud to Gain from AI Lead

 Goog-stockGOOG Stock Stands to Gain from Google Cloud Push

Alphabet Inc (NASDAQ:GOOG, GOOGL) stock has been on an upward trend for a while now, and GOOG stock ended the last trading session at $835.37.

Alphabet, otherwise known as Google, has grabbed attention over the past few weeks as the newer social media company Snap Inc (NYSE:SNAP) turned out to be a big customer of the Google’s cloud business. But the surprise does not end there. At its ongoing Google Cloud Next ‘17 Conference, Google announced its new partnership with SAP SE (ADR) (NYSE:SAP) and introduced new clients.

The big announcements are expected to keep flowing as the Internet search giant hosts its conference in San Francisco this week. The most important news right now is that the company has won major clients like Verizon Communications Inc. (NYSE:VZ), eBay Inc (NASDAQ:EBAY), Walt Disney Co (NYSE:DIS), ColgatePalmolive Company (NYSE:CL), and HSBC Holdings plc (ADR) (NYSE:HSBC) for its cloud business. (Source: “Google Cloud: enterprise technology for the Next step in computing,” Google Blog, March 8, 2017.)

This is a big leap forward for “Google Cloud Platform” and shows that Alphabet is ready to take on strong competitors like Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft Corporation (NASDAQ:MSFT).

Why Is Google Cloud Important for GOOG Stock

With the recent cloud deals, Alphabet has taken significant steps for the growth of its cloud business as well. Although the company is unbeatable in the search engine business (which is the reason for GOOG stock’s strength), it looked like it was falling behind in the next frontier of cloud computing.

Cloud computing is at the center of nearly unlimited computing power around the globe today, and Google management pegs the enterprise computing market at $1.0 trillion. Alison Wagonfeld, VP of Marketing for Google Cloud, said, “Google Cloud’s technology and approach to the market is the product of 16 years inventing, developing, and fine tuning tools for a fully connected enterprise.” (Source: Ibid.)

Even though its technology is considered to be superior, Google is quite behind Amazon and Microsoft in the cloud market. With the new Google Cloud deals, Alphabet wants to change that. Alphabet is a long-term player, and GOOG stock reflects that consistency, as the stock chart shows below.

Goog stock chart
Chart courtesy of StockCharts.com

Google executive Diane Greene said  she learned on Tuesday that Google Cloud was recognized as having the “highest availability” for any cloud provider in 2016. This means that there was less chance of the system crashing. This gains significance because, last week, a human error at “Amazon Web Services” led to a massive Internet outage for many hours. (Source: “Google Adds Cloud Customers, Nabbing Verizon From Microsoft,” Bloomberg, March 8, 2017.)

It is true that today, Amazon and Microsoft may be the leading cloud players, but Google artificial intelligence (AI) tools are most likely to give a strong competition to their dominance. And, in the long term, this bodes well for the company and for GOOG stock.

Google Acquires Kaggle with Focus on Data Scientist Community

Google announced the acquisition of Kaggle Inc., which is home to the world’s largest community of data scientists and machine learning enthusiasts. Kaggle is used by more than 800,000 data experts to analyze and understand the latest updates in machine learning and data analytics.

Fei-Fei Li, Chief Scientist, Google Cloud AI and Machine Learning, welcomed Kaggle to Google Cloud and stated that it was the best place to search and analyze public datasets, build machine learning models, and enhance one’s data science expertise. (Source: “Welcome Kaggle to Google Cloud,” Google Cloud Platform Blog, March 8, 2017.)

With the acquisition of Kaggle, Alphabet takes a step closer to its mission of democratizing AI, lowering the entry barriers to AI, and making it available to a larger community of developers. It would also help Google to shape the field of machine learning and AI, which is what the company is focused on aggressively.

Google leads in AI and machine learning, and the company’s superiority is evident in the success of “YouTube” as well.

Also, according to a report in Mirror, Google’s AI can diagnose cancer faster than human doctors can, because Google’s AI program may be able to tell the difference between healthy and cancerous tissue. (Source: “Google’s artificial intelligence can diagnose cancer faster than human doctors,” Mirror, March 7, 2017.)

The high-level image recognition required for this task was first developed for Google’s driverless car program and now has been adopted for the medical field. Alphabet is clearly starting to explore the potential of its strengths in the field of AI, but the slow speed is weighing on Google stock.

It is well known that AI will drive the next stage of cloud computing. It is also true that Amazon and Microsoft are not sitting idle. However, given Alphabet’s dominance in Internet search technology and the company’s long history, it might have a competitive edge when it comes to AI.

Things will eventually become more clear as time goes on, since Google has only just started the Google Cloud business on a serious note. In a field where Amazon has been the fastest player, Alphabet likes to play it slow and steady.

Alphabet may have the superior technology, but it needs to move faster. Google stock may take its own time in moving higher. GOOG stock has returned eight percent year-to-date as compared to the six percent returned by the S&P 500 index.  This year, the company and the stock may surprise investors.