Google's 'Cannibalization' Risk Vs Microsoft's Azure Growth: Expert Explains How AI Answers Could Slash GOOG's Ad Revenue

As the AI contention hurtles toward 2026, marketplace analysts are sharply divided connected the fortunes of tech giants, informing that Alphabet Inc.-owned (NASDAQ:GOOG) (NASDAQ:GOOGL) Google’s clasp of generative AI could severely undercut its halfway advertizing concern portion favoring Microsoft Corp.'s (NASDAQ:MSFT) unchangeable unreality growth.

While speaking to Schwab Network, Cory Johnson, Chief Market Strategist astatine Epistrophy Capital Research, argues Google faces a unsocial existential threat: to enactment relevant, it indispensable disrupt its ain highly profitable concern model.

Google has historically generated immense gross by providing hunt links that users click for information. However, generative AI provides nonstop answers, eliminating the request for those clicks.

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“It cannibalizes their business,” Johnson explained. He noted that erstwhile Google presents AI results, they supply answers alternatively than links, which cuts consecutive into their superior gross stream.

Johnson pointed to information suggesting users are importantly little apt to click distant to different sites erstwhile provided with an AI-generated reply compared to accepted hunt results.

Conversely, John Freeman, Co-Founder of Ravenswood Partners, favors Microsoft heading into 2025 and 2026.

Freeman argues Microsoft offers important AI upside done its Azure unreality platform—which precocious posted 35% growth—without facing the aforesaid interior disruption risks arsenic Google.

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Freeman stressed that halfway nett engines similar Windows and Microsoft 365 are improbable to beryllium disrupted by AI successful the adjacent term, positioning the institution arsenic a safer comparative bet.

Beyond the bundle giants, some analysts hold the contiguous concern accidental lies successful the monolithic infrastructure buildout required to powerfulness AI.

While Johnson focuses connected the wide spending toward information centers, networking, and power, Freeman specifically highlighted the “memory trade.”

He recommended Micron Technology Inc. (NASDAQ:MU) and Lam Research Corp. (NASDAQ:LRCX) arsenic superior beneficiaries of the surging request for the monolithic amounts of DRAM representation required by progressively ample AI models.

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Alphabet’s Class A shares soared by 76% implicit the past six months and 65% implicit the past year. On Monday, the banal roseate 0.44% to $316.54 apiece.