Microsoft Ramps Up AI Portfolio: Should AMZN, AAPL Take Note?

Microsoft’s MSFT recent buyout of Semantic Machines is a testament to the fact that tech giants are trying to gain a competitive edge in the conversational artificial intelligence (AI) industry either through innovation or inorganic additions.

Microsoft recently announced that it has acquired Berkeley, CA-based Semantic Machines, which introduced an extensive approach for the development of conversational AI.

With this acquisition, Microsoft has also strengthened its talent pool with prominent names like UC Berkeley professor, Dan Klein, Stanford University professor, Percy Liang, former Apple chief speech scientist, Larry Gillick and technology entrepreneur, Dan Roth.

Microsoft Gaining Traction in Conversational AI

Notably, Microsoft has been working on speech recognition and natural language understanding for the development of its conversational AI initiatives. The company earlier introduced pre-built Cognitive Services into its intelligent assistants. Microsoft Cognitive Services and Azure Bot Service have found a number of takers already

Additionally, Microsoft has also powered its voice assistant, XiaoIce with full duplex voice sense technology. It has been upgraded with this feature and can communicate like on a telephone call, instead of having a walkie talkie like conversation.

Furthermore, Microsoft’s digital assistant Cortana has aided the accelerated adoption of the company’s virtual assistants powered by conversational AI. The addition of Semantic Machines is expected to enhance Microsoft’s overall conversational AI capabilities, thereby helping it gain a strong foothold in the industry.

Microsoft currently has a Zacks Rank #3 (Hold). The long-term earnings growth rate for the company is 11.9%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Microsoft Corporation Revenue (TTM)

Microsoft Corporation Revenue (TTM) | Microsoft Corporation Quote

Other Players in the Conversational AI Space

Per a recent report by Grand View Research, the AI market is expected to hit $35.9 billion by 2025 at a CAGR of 57.2% with 2017 as the base year. The projected figure takes into account direct revenue sources.

Given the huge growth prospect in the industry, the key players are all putting their best foot forward to grab a major share of the projected revenue growth.

One of the most well-known players in the conversational AI powered virtual assistant industry is Amazon AMZN. Alexa, its voice assistant, has already been integrated into a host of everyday devices for smart homes.

Amazon has collaborated with home builder, Lennar, per which the electronic devices in the houses can be run with Alexa operated commands. Additionally, the company is building a healthcare division within Alexa. Clearly, the company is racing to build an ecosystem around Alexa to emerge as a winner in the space.

Amazon currently has a Zacks Rank #2 (Buy). The long-term earnings growth rate for the company is 30.2%.

Amazon.com, Inc. Revenue (TTM)

Amazon.com, Inc. Revenue (TTM) | Amazon.com, Inc. Quote

Alphabet’s GOOGL Google is also making its presence felt in the conversational AI industry. Most recently, the company demonstrated its new technology Google Duplex. This technology will be incorporated into Google Assistant and will enable the system to call and speak to people on the user’s behalf.

The company has also been showing keen interest in the AI-powered home assistant space. Carrying out a host of functions including playing music, reading books, managing calendars and answering queries, Google Home, which the company launched in 2016, is gaining traction.

We believe that the Duplex feature will increase adoption, thereby cementing Google’s position in the conversational AI industry.

Google currently has a Zacks Rank #3. The long-term earnings growth rate for the company is projected to be 17.2%.

Alphabet Inc. Revenue (TTM)

Alphabet Inc. Revenue (TTM) | Alphabet Inc. Quote

Finally, let’s take a look at the conversational AI related initiatives of iPhone maker, Apple AAPL. The company’s virtual assistant Siri has been in the market for quite some time now and has gained much popularity as well.

Most recently, Siri itself revealed that it would be getting a new voice that will be announced at the upcoming WWDC event. A new HomePod seems to be in the cards as well. Apple has also been making some important changes to Siri, which will now be integrated with iOS 11. and will be capable of translating too.

The new enhancements are expected to drive Siri’s uptake, which, in turn, will strengthen the company’s foothold in the industry.

Apple currently has a Zacks Rank #3. The long-term earnings growth rate for the company is projected to be 11.8%.

Apple Inc. Revenue (TTM)

Apple Inc. Revenue (TTM) | Apple Inc. Quote

Conclusion

The global voice assistant market is currently dominated by Amazon with Alexa having around 62% of market share. Google Assistant is next with around 25% share of the market within its coverage.

These players are coming up with advanced technologies to combat the initiatives of their competitors and it will be interesting to see future developments in the space.

With the current advancements and the incorporation of cognitive thinking process into machines, these artificially intelligent voice assistants are slowly becoming part of regular life.

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