Microsoft’s decision to implement a premium price for its artificial-intelligence (AI) features in its workplace software has caused its stock to reach an all-time high. However, analysts at UBS suggest that Google has the potential to overtake its rival by introducing a similar tool at a significantly lower cost.
According to UBS’s Lloyd Walmsley, Google could price its AI tool, called Duet AI, at $9.47 per month per user for its Workspace productivity suite. This would be a substantial difference compared to Microsoft’s 365 Copilot software, which was recently detailed at a monthly cost of $30.
Walmsley stated in a research note that Google has a strategic advantage in the AI market, describing it as an “offensive generative AI position.”
Unlike in the search industry, where Google integrating AI could potentially cannibalize its existing dominant product, Google has the opportunity to gain market share in productivity tools. Although Duet AI is available for preorder to existing Workspace customers, the release date is still unknown.
Walmsley estimates that if 15% of Google’s existing customers adopt Duet AI, it could result in an incremental revenue of $2.2 billion by 2024. Nevertheless, he points out that Google’s customer base for Workspace consists of smaller businesses and more price-sensitive customers compared to Microsoft, limiting their ability to charge premium prices.
“The offensive opportunity in Workspace – while a modest positive – does not change our Neutral view on shares given a higher exposure to potential monetization headwinds in the core search business,” Walmsley wrote.
UBS currently maintains a Neutral rating on Alphabet stock with a target price of $132. As of early Thursday, Alphabet shares were down 0.2% at $121.77.
