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Why One Analyst Picks Microsoft Over Google in AI: 'You Don't Have the Downside Risk'

MarketDash Editorial Team
2 hours ago
Analysts debate whether Google's AI ambitions are cannibalizing its lucrative search business, while Microsoft's Azure cloud platform appears positioned to benefit from the shift without risking its core revenue streams.

The AI race is heating up, and not everyone thinks Alphabet Inc. (GOOGL) is in the driver's seat. In a recent conversation on Schwab Network, analysts made the case that Microsoft Corporation (MSFT) might actually be the safer bet when it comes to artificial intelligence, thanks to a crucial advantage: Microsoft doesn't have to worry about AI eating its own lunch.

The Cannibalization Problem

Here's the issue facing Google. John Freeman, Co-Founder and Senior Analyst at Ravenswood Partners, pointed out that Google's entire business model has historically been built on giving you a list of links, not direct answers. That worked brilliantly for decades. But now ChatGPT shows up and just tells you the answer, which means fewer clicks on Google's search results, which means less advertising revenue.

"Anything on the margin that clips it, I think would really...hurt the stock," Freeman said.

It's a delicate situation. Google is racing to develop cutting-edge AI like Gemini 3 to compete with upcoming models like ChatGPT 6, but the better their AI gets at giving direct answers, the more it potentially undermines the click-based advertising model that made them a tech giant in the first place. Talk about being stuck between a rock and a hard place.

Why Microsoft Looks Different

Freeman explained why he prefers Microsoft as an investment over Google. Microsoft's Azure has emerged as the leading AI cloud provider, and it wields significant influence over the developer community, which strengthens its competitive position even further.

"And you don't have the downside risk of generative AI disruption. I mean, you've got Microsoft 365 and Windows. Those are not likely to be disrupted by AI anytime soon," Freeman added.

That's the key difference. Microsoft can go all-in on AI without worrying that success will cannibalize its core businesses. Windows and Office aren't threatened by chatbots. If anything, AI features make those products more valuable. Azure can host everyone else's AI models and collect the toll either way.

Corey Johnson, chief market strategist at Epistrophy Capital Research, agreed with Freeman's take. What Google is doing with AI, Johnson argued, fundamentally erodes how the company generates revenue through clicks.

"Their business is at inherent risk because of the cannibalization of AI," he stated.

Not Everyone's Worried About Google

These concerns align with broader momentum around Microsoft in the AI space. Wedbush analyst Dan Ives has argued that Wall Street is underestimating Microsoft, claiming the company is getting "no respect" despite being positioned for substantial AI-driven growth in 2026, particularly through its cloud business and strategic AI deployments.

Microsoft is certainly putting its money where its mouth is. The company is investing billions globally to expand its cloud and AI infrastructure, including its largest-ever commitment in Canada—a $19 billion CAD ($13.85 billion) investment between 2023 and 2027 to build digital and AI infrastructure and boost data center capacity by late 2026.

But here's the thing: not everyone buys the doom-and-gloom narrative about Google's search business. Some analysts believe Wall Street has already moved past viewing AI as an existential threat to Google and now sees it as a massive opportunity. Landon Swan, co-founder of LikeFolio, says he's highly optimistic about Google's ability to leverage AI technology effectively.

The market data tells an interesting story. According to MarketDash's rankings, Microsoft lands in the 81st percentile for quality and the 52nd percentile for momentum. Meanwhile, Google actually scores better on quality, sitting at the 94th percentile.

What the Market Says

Price Action: Over the past year, Microsoft stock climbed 15.54%, while Google soared 64.61%. On the final trading day of 2025, Microsoft stock closed 0.79% lower at $483.62, while Google fell 0.24% to close at $313.80, according to market data.

The divergence in performance suggests investors are wrestling with the same questions analysts are debating. Is Google's massive run-up a vote of confidence that the company will successfully navigate the AI transition? Or is Microsoft's steadier performance a reflection of its more defensible position?

The truth is probably somewhere in the middle. Google has massive resources, incredible AI talent, and a search business that remains wildly profitable even if margins compress slightly. Microsoft has Azure growing like a weed and core businesses that AI enhances rather than threatens. Both companies are positioned to benefit from the AI revolution, just in different ways with different risk profiles.

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Why One Analyst Picks Microsoft Over Google in AI: 'You Don't Have the Downside Risk'

MarketDash Editorial Team
2 hours ago
Analysts debate whether Google's AI ambitions are cannibalizing its lucrative search business, while Microsoft's Azure cloud platform appears positioned to benefit from the shift without risking its core revenue streams.

The AI race is heating up, and not everyone thinks Alphabet Inc. (GOOGL) is in the driver's seat. In a recent conversation on Schwab Network, analysts made the case that Microsoft Corporation (MSFT) might actually be the safer bet when it comes to artificial intelligence, thanks to a crucial advantage: Microsoft doesn't have to worry about AI eating its own lunch.

The Cannibalization Problem

Here's the issue facing Google. John Freeman, Co-Founder and Senior Analyst at Ravenswood Partners, pointed out that Google's entire business model has historically been built on giving you a list of links, not direct answers. That worked brilliantly for decades. But now ChatGPT shows up and just tells you the answer, which means fewer clicks on Google's search results, which means less advertising revenue.

"Anything on the margin that clips it, I think would really...hurt the stock," Freeman said.

It's a delicate situation. Google is racing to develop cutting-edge AI like Gemini 3 to compete with upcoming models like ChatGPT 6, but the better their AI gets at giving direct answers, the more it potentially undermines the click-based advertising model that made them a tech giant in the first place. Talk about being stuck between a rock and a hard place.

Why Microsoft Looks Different

Freeman explained why he prefers Microsoft as an investment over Google. Microsoft's Azure has emerged as the leading AI cloud provider, and it wields significant influence over the developer community, which strengthens its competitive position even further.

"And you don't have the downside risk of generative AI disruption. I mean, you've got Microsoft 365 and Windows. Those are not likely to be disrupted by AI anytime soon," Freeman added.

That's the key difference. Microsoft can go all-in on AI without worrying that success will cannibalize its core businesses. Windows and Office aren't threatened by chatbots. If anything, AI features make those products more valuable. Azure can host everyone else's AI models and collect the toll either way.

Corey Johnson, chief market strategist at Epistrophy Capital Research, agreed with Freeman's take. What Google is doing with AI, Johnson argued, fundamentally erodes how the company generates revenue through clicks.

"Their business is at inherent risk because of the cannibalization of AI," he stated.

Not Everyone's Worried About Google

These concerns align with broader momentum around Microsoft in the AI space. Wedbush analyst Dan Ives has argued that Wall Street is underestimating Microsoft, claiming the company is getting "no respect" despite being positioned for substantial AI-driven growth in 2026, particularly through its cloud business and strategic AI deployments.

Microsoft is certainly putting its money where its mouth is. The company is investing billions globally to expand its cloud and AI infrastructure, including its largest-ever commitment in Canada—a $19 billion CAD ($13.85 billion) investment between 2023 and 2027 to build digital and AI infrastructure and boost data center capacity by late 2026.

But here's the thing: not everyone buys the doom-and-gloom narrative about Google's search business. Some analysts believe Wall Street has already moved past viewing AI as an existential threat to Google and now sees it as a massive opportunity. Landon Swan, co-founder of LikeFolio, says he's highly optimistic about Google's ability to leverage AI technology effectively.

The market data tells an interesting story. According to MarketDash's rankings, Microsoft lands in the 81st percentile for quality and the 52nd percentile for momentum. Meanwhile, Google actually scores better on quality, sitting at the 94th percentile.

What the Market Says

Price Action: Over the past year, Microsoft stock climbed 15.54%, while Google soared 64.61%. On the final trading day of 2025, Microsoft stock closed 0.79% lower at $483.62, while Google fell 0.24% to close at $313.80, according to market data.

The divergence in performance suggests investors are wrestling with the same questions analysts are debating. Is Google's massive run-up a vote of confidence that the company will successfully navigate the AI transition? Or is Microsoft's steadier performance a reflection of its more defensible position?

The truth is probably somewhere in the middle. Google has massive resources, incredible AI talent, and a search business that remains wildly profitable even if margins compress slightly. Microsoft has Azure growing like a weed and core businesses that AI enhances rather than threatens. Both companies are positioned to benefit from the AI revolution, just in different ways with different risk profiles.