Google had a ‘Kodak moment’ last year as Microsoft takes lead in AI, strategist says

Google last year had a “Kodak moment” when it came to artificial intelligence, giving rival Microsoft an edge with the technology, one strategist told CNBC on Wednesday.

Cyrus Mewawalla, head of thematic intelligence at GlobalData, called AI the big theme of 2023 and said that “Microsoft has stolen a lead on Google” with its investment in OpenAI — the company behind ChatGPT.

“Microsoft is currently winning this race in AI,” Mewawalla told CNBC’s “Squawk Box Europe.”

ChatGPT is a viral AI chatbot that is trained on large amounts of data to give responses to user queries.

Microsoft has announced plans to integrate ChatGPT into some cloud computing products, as it looks to infuse AI across its business.

Google, under parent Alphabet, has been investing in AI for years. The company acquired British AI start-up Deepmind in 2014 to supercharge its efforts with the technology.

Last week, Alphabet merged its Google Research team Brain with DeepMind, in a bid to bring the arms closer and concentrate its AI efforts.

Mewawalla said this should have been done “a long time ago” and that Google, even though it has “great AI,” fell behind Microsoft last year.

“In a way in 2022, it (Google) had a Kodak moment. It had the leading product but it kept it aside for fear that it could cannibalize its core business. Now its core business is under massive threat,” Mewawalla.

Google’s search product is the tech giant’s core business. Microsoft has also been integrating OpenAI technology into its search product Bing.

A Kodak moment is a phrase used to describe the inability to foresee future trends. It references camera firm Eastman Kodak Company, which failed to transition into the digital age.

In response to Microsoft, Google launched its own chatbot called Bard AI this year and has begun testing it with users. Sundar Pichai, CEO of Alphabet, said on a Tuesday earnings call that the company will be bringing the AI technology behind Bard into search products in the future.

Analysts said that, while Google has strong AI technology, it hasn’t brought it into products fast enough, as Microsoft has done.

“Google’s issue is that they have the brightest minds in AI, they have the rockstars, they have a third of the top hundred cited papers in AI, but they’re an engineering-led company, and they have not productized what they’ve done,” Richard Kramer, senior analyst at Arete Research, told CNBC’s “Worldwide Exchange.”

Some analysts see Alphabet’s investment in AI over the years as giving it an advantage, going forward.

JPMorgan said in a note published Wednesday that Alphabet is “well positioned in AI through years of investments across its business lines” and is accelerating efforts around commercializing the technology behind AI chatbots, known as large language models.

Executives talked up the company’s prowess and investments in AI during Alphabet’s first-quarter earnings call on Tuesday. Ruth Porat, CFO of Alphabet, said that the company will increase its capital expenditure this year from 2022, with AI being a “key component” of that.

Pichai said Alphabet is infusing its AI technology across many different products.

“First, the incredible AI opportunity for consumers, our partners and for our business. I’ve compared it to the successful transition we made from desktop to mobile computing over a decade ago. Our investments and breakthroughs in AI over the last decade have positioned us well,” Pichai said.