Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL), two tech giants, have reported remarkable three-year returns of 65% and 60%, respectively, driven by their diversified business models and investments in artificial intelligence (AI). Microsoft's acquisition of Activision Blizzard (NASDAQ:ATVI) represents a significant expansion opportunity in the gaming industry, while Alphabet's ongoing development of the AI model Gemini is seen as a direct competitor to Microsoft's ChatGPT.
Microsoft's broad business model includes AI features incorporated into its Office suite and investments in OpenAI. These initiatives are projected to generate $10 billion annually from AI. The company's recent acquisition of Activision Blizzard offers a substantial growth opportunity within the gaming sector.
On the other hand, Alphabet primarily relies on Google Search and YouTube for its revenue, which generated an impressive $59.6 billion last quarter, surpassing Microsoft's total revenue. The company is currently developing an AI model, Gemini, aiming to compete with Microsoft's ChatGPT. Alphabet's focus on enhancing YouTube and Google with AI could potentially offer more long-term value for growth investors.
Despite their success, both companies are facing antitrust lawsuits from the U.S government. Google maintains an 84% market share on desktops, even under scrutiny for its search dominance.
While Microsoft trades at a higher earnings multiple due to its AI advancements and diverse business model, Alphabet's concentrated efforts on enhancing YouTube and Google with AI could provide more long-term value for growth investors.
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