- Bloomberg reported Monday Apple and Google are in talks for iPhones to integrate Gemini AI.
- Apple and Alphabet stocks both climbed in early trading.
- "The potential deal is a validation moment for Google's generative AI positioning," Wedbush said.
Bloomberg reported Monday that Google and Apple are in talks to potentially integrate Gemini's generative AI technology with iPhones, and shares of both companies soared on the news.
While no agreement has been finalized, Wall Street cheered on both companies in early trading. Before midday in New York, Alphabet stock climbed 6.75% to hover at $151, while Apple shares moved nearly 3% higher to change hands at $177.45 a share.
"The potential deal is a validation moment for Google's generative AI positioning," Wedbush analyst Scott Devitt said in a note Monday.
The firm holds an "outperform" rating for Alphabet and a 12-month price target of $160.
Sources told Bloomberg that Apple could license Gemini to support new software coming to iPhones this year, adding that Apple has held similar discussions with OpenAI.
For Google and Gemini, a partnership with Apple would provide a welcome vote of confidence after recent controversy surrounding its "woke" chatbot and generation of historically inaccurate images. The company faced widespread backlash from tech communities online, including criticism from Elon Musk, as well as other executives and reporters.
Bank of America views the deal as a likely positive development for both the iPhone maker and Google.
"A partnership that can incorporate GenAl features faster into iPhones (software features in 2024) and incremental hardware features in 2025 would be a positive for both Apple and for the potential partner if Apple ends up with an agreement," Bank of America strategists wrote in a note Monday. "Maintain Buy on Al-driven multi-year upgrade cycle and potential for gross margins to re-rate higher."
In Wedbush's view, the bear case here involves the competition in the generative AI and search space, in addition to "the perception that Google has mismanaged its approach to commercialization."
And as for Apple, Devitt said a strategic partnership with Google offers the "missing piece."
"This is a major win for Google to get onto the Apple ecosystem and have access to the golden installed base of Cupertino," he said. "For Apple this will give them the foundation and technology blueprint to double down on AI features currently being developed within Apple Park to make sure that iPhone 16 will be a potential game changer iPhone release around AI functionality."