Alphabet (GOOGL) is underperforming the market Monday, following an article form The New York Times that suggests "Google's employees were shocked when they learned in March that the South Korean consumer electronics giant Samsung was considering replacing Google with Microsoft's (MSFT) Bing as the default search engine on its devices."
Other speculation puts the devices in question to be Samsung's Galaxy products. The Times report goes on to call out Alphabet derives around $3 billion in annual revenue with Samsung as well as from others relating to Search, including Apple (AAPL) , which currently makes Google the default search engine on iPhone. This, of course, explains the fire that has been lit under Alphabet with its Bard AI tool as well as other new features being developed.
AAP is long GOOGL, AAPL and MSFT.
Samsung's share of the mobile phone market is around 19%, according to the latest data from Counterpoint Research, while Statista puts its share of the global PC market between 10%-11%. Those data points suggest Samsung isn't quite the front runner it once was in the smartphone market, but it is still the second largest vendor behind Apple. That said, Samsung is an Android shop, which means it is rather reliant on Alphabet, especially since Microsoft shut Windows for Mobile back in 2019, a product that never really cracked the smartphone market.
While we can't rule it out, given its reliance on Android, the more likely scenario is Samsung is talking with Microsoft as part of a negotiating tactic with Alphabet. Recall in early April Samsung shared its March quarter profits fell ~96% year over year, hitting a 14-year low and shortly thereafter it cut memory chip production.
Stepping back, as AI related headlines progressed throughout the March quarter and into the current one, we've seen quite a bit of stock price movement among those that announced AI offerings or AI powered ones. Earlier today, Chegg (CHGG) announced a "Cheggmate" study aid powered by, you guessed it, Open AI, and recent AAP Podcast guest Presto Automation (PRST) , which offers automation technology primarily for drive thru applications, is seeing its shares climb today following a tweet by Chairman & CEO Krishna Gupta about some things to be shared later today from the Big Leadership Conference being held today. And over the weekend, Elon Musk founded a new artificial intelligence company named X.AI.
In the past we've seen the latest new-new thing in tech take over, driving headlines and arguably irrational exuberance. We're not saying this could be like the dot com bubble, but more like other technologies whose expectations got ahead of themselves. Have we heard anything about the metaverse lately?
We continue to expect further announcements and developments, which are likely to result in a more level playing field over time. The underlying positive for AI adoption is the incremental demand it will place of digital infrastructure, something that keeps us long-term positive on the shares of Marvell (MRVL) .
As we noted when we published the AAP Podcast with Presto Automation, the average daily volume for PRST shares of ~65,000 shares per day was a key reason why the AAP Portfolio could not take a position in the shares. Six weeks later, that average daily volume has only risen to ~67,000 shares, a far distance from the lowest average daily volume position in the portfolio that is Chipotle (CMG) with ~270,000 shares.