Morgan Stanley analysts said in a note Wednesday assessing the AI race between Alphabet's (NASDAQ:GOOGL) Google, Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), and Meta Platforms Inc (NASDAQ:META) that "AI-based assistants seem to be the way."
The analysts stated they see "transformer models and large language models (LLMs) leading to the development of next Gen AI assistants with increased personalization, incremental use cases," and higher consumer utility.
Google is leading, according to the analysts, with its ~3 billion install base of users offering "significant reach advantages."
"GOOGL's data is also a key differentiator as the amount of data generated from the Android ecosystem, Chrome, Search, YouTube, Google Maps, and productivity tools like Gmail is industry-leading. GOOGL also has existing partner/developer relationships through its AI developer tools that we expect to further its data-set and reach over time," the analysts wrote.
The analysts stated that Amazon has an install base of 400 million smart devices, but they "think it is a step behind best-of-breed hardware players like GOOGL/AAPL."
"We would argue that the active daily user base gap is even larger," the analysts added.
While Morgan Stanley feels Apple is positioned to deliver a broad-based personal AI assistant, they note that its AI model capabilities are less clear.
"We estimate that nearly all of Apple's 2B device installed base (1.2bn iPhones) is Siri compatible," they stated. "While reports have indicated Siri's design makes it difficult to add new features and search tools, we believe Apple could be uniquely positioned to combine LLMs with Siri, given the company's focus on privacy."
Finally, the analysts said Meta's user reach, data, and AI expertise could offset its hardware disadvantages.
"While META does not have a large hardware installed base, its reach is underscored by 3bn Daily Active People across its family of apps. While this is somewhat of a weaker strategic position to be in than AAPL, GOOGL, and AMZN, who own the physical touch points, it doesn't mean META won't have success with LLM-based assistants," explained the analysts. "META has a significant data advantage given the size of its user base and usage/frequency."