3 analysts discuss implications for Apple, Google after OpenAI's event

OpenAI hosted a Spring Update event announcing a new desktop app, web UI refresh, and the launch of GPT-4o. Following the event, analysts at BofA and Rosenblatt provided their thoughts on what it could mean for Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOGL).

Rosenblatt analysts told investors in a note that it was an "impressive" update, demoing a new version of ChatGPT-4 "that appeared to set a new high watermark for large language model natural interactions across voice, visual and text."

"In our view, the demo ramps up extreme competitive pressure on Google," according to Rosenblatt. "Google's Gemini demo of multi-modal capabilities was mocked for being prerecorded, staged and sped up. OpenAI was clearly making a claim of superiority by having a live conversation. Tuesday, Google I/O will look inferior if it can't match that."

When it comes to Apple, the firm said OpenAI's audio capabilities seemed to be what Apple has wanted to achieve all along with Siri, but has never accomplished.

"Apple has promised a new suite of AI features, presumably to be introduced at WWDC in June," wrote Rosenblatt. "We suspect that Apple is nowhere near, internally, to what OpenAI just demoed."

"If Google can't show an ability to match OpenAI at I/O, then Apple will be under meaningful pressure, we believe, to partner with OpenAI to modernize Siri for the current state of AI."

They add that for Apple, working with OpenAi "could be a boon" if it can turbocharge Siri to a new level of effectiveness, "perhaps reinvigorating iPhone sales, especially if its feature set beats what Google can deliver on Android."

Meanwhile, BofA said OpenAI's update "ups the ante for AI assistants."

The firm explained that the demo highlighted how devices at the edge (Mac, iPhones to start) can benefit from AI.

"By combining voice, text and images seamlessly, the demo captured how AI can drive incredible amounts of productivity," said BofA. "Much of the demo used a 'hardwired' iPhone to lower latency of real time interaction."

Analysts at Bank of America maintained a Buy rating on Apple based on the benefits from GenAI at edge with gross margin upside and momentum in Services.

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