Morgan Stanley says Meta bigger threat to Google than ChatGPT

Google-parent Alphabet (NYSE: GOOGL) faces a bigger competitive threat from Meta (NYSE: META) than ChatGPT, as the tech giants race to dominate the space for artificially intelligent chatbot assistants and wearable hardware for consumers.

That's the view of Morgan Stanley's US internet analyst Brian Nowak, who addressed The Morgan Stanley Australia Conference on the future of search engines, AI apps as assistants, and why he thinks web browsers as we know them will be "dead" within five years. 

 

Nowak detailed three ways he thinks Facebook, Instagram, and WhatsApp-owner Meta can challenge Google's traditional dominance of search engines and the pay-per-click (PPC) ad market riches associated with it. 

"One of the most interesting things to observe the next 18 months is going to be can the Meta AI App, or the Meta AI search bar within Instagram or WhatsApp actually drive commercial behaviour?," he asked. 

"When you play with it right now, it doesn't. It's sort of silly. You can have interesting conversations with it, but you can't ask it to shop for Lego. It doesn't know what it's doing."

Ambitions to develop Llama reasoning model 

According to Nowak, if Meta develops an improved reasoning large language model (LLM) able to understand consumer queries, its apps could work as intelligent search engines able to help its vast network of more than 3 billion users in everyday tasks commonly provided by Google Search, Maps, Docs, or other online services. 

"So the Llama reasoning model is what we think's still coming out [from Meta] later this year," Nowak told the conference. 

"Once that new model comes out, we could see more commercial potential with it. If that happens, then there's a search optionality in Meta [stock] that's not priced at all [and] that's also like the biggest swing factor of how we feel about Google the next 18 months."

The managing director at Morgan Stanley added that he expects Alphabet to continue to trade on a 2026 forward price-to-earnings (PE) multiple between 15 and 20 times, as the market sits on the fence over whether it's a net beneficiary or loser from the AI revolution. 

He added that PE multiple could easily jump back above 20 times if the market concludes Google will successfully integrate AI into its search products and beat out the competition from the likes of Meta, ChatGPT, Deepseek, and Perplexity. 

On the assumption that Google's self-driving taxi business, Waymo, also extends its rapid growth, Nowak suggested the market could push the stock back to a multiple above 25 times. 

The analyst also declared that smartphones kept in pockets or bags as technology assistants, will soon be replaced by other, more convenient wearables.

He added that Meta has a chance to win in the next-generation of AI wearables space, with its fast-selling Rayban sunglasses and potential new products including finger rings, contact lenses and wrist bands. 

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