The Apple-Google AI deal is a massive win for investors in both tech giants
One of the key pillars of our investment in Google owner Alphabet took place on Monday. Other Club name Apple has chosen Google’s AI model Gemini to power AI features in Siri and other key products towards the end of this year. The multi-year partnership to integrate Gemini into Apple’s core models was also confirmed in an Apple statement obtained by Jim Cramer and represents a significant validation of Google’s AI capabilities. “Gemini won,” he said Monday on “Squawk on the Street,” adding that Apple “did a fair review and decided Google was best.” Alphabet shares rose more than 1.5% following the news, reaching an all-time high of $334. The stock briefly joined the $4 trillion market cap club before breaking out of the day’s highs. Apple shares gained only 0.5% on the Gemini news. Last week, Alphabet surpassed Apple’s market capitalization for the first time since 2019 and remained above that figure on Monday. The mega-cap tech partnership shows Google’s Gemini leaving a dominant footprint in the AI war. This reinforces why we launched our position on Alphabet in late December. While we backed off early last year due to concerns that Google was losing ground to OpenAI’s ChatGPT, Gemini’s rapid development, especially its latest iteration and smartest model in Gemini 3, has flipped the script. Alphabet’s Gemini is more than a chatbot: it’s a reasoning engine designed to process information the same way a human does. This is the news Jim foretold Investment Club members in his first Sunday think piece of the year. “Gemini3 will soon strengthen its dominance by making a deal with Apple to be the sole source of AI content. That means 1.5 billion users. What will happen to others, including OpenAI?” Writing on Jan. 4, he called Alphabet “the best-positioned hyperscaler with Gemini 3, the best, most accurate site, and the best business model, thanks to its masterful alignment with Google.” The improved partnership is also positive for Apple, which is trying to improve its AI strategy. Jim said the stock has been a “huge disappointment since the beginning of the year,” citing investors’ concerns about the decline in services revenue. Indeed, Apple has become the odd company in the mega-major tech conglomerate, given that it lacks a clear AI roadmap. This is the main reason why it underperformed the broader market last year. The biggest fear among investors is that Apple won’t introduce AI features that will encourage people to buy the latest iPhone and keep their older phones for longer. But after speaking with Eddie Cue, Apple’s senior vice president of services, Jim discovered that the company’s services segment was “incredibly strong.” Wall Street also has a positive outlook. Wedbush’s Dan Ives sees Monday’s news as “an incremental positive for both AAPL and GOOGL,” in a note to investors. Ives called it “an important moment of validation for Google as a leading foundational model and for Apple as a stepping stone to accelerate its AI strategy to 2026 and beyond.” Jim reiterated his “own it, don’t trade it” stance on Apple, and we maintain our $300 price target and 2 rating on the stock. As for Alphabet, we have a $350 price target and a 1 rating on the stock. (Jim Cramer’s Charitable Trust is long AAPL, GOOGL. See here for a full list of stocks.) When you subscribe to the CNBC Investment Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charitable foundation’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trading alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH THE DISCLAIMERS. NO CIVIL OBLIGATIONS OR DUTIES EXIST OR SHALL BE RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULT OR PROFIT CAN BE GUARANTEED.
