THE LEX COLUMN: Logic in Alphabet’s AI ambitions
Staying at the leading edge of technology should help group maintain dominance
Gmail offers to finish your sentences. Critics compare it to an overfriendly waiter. Its Silicon Valley parent puts it in more grandiose terms: “smart compose” is an example of Alphabet’s efforts to bring the benefits of artificial intelligence (AI) to everyone, it says. This ambition has logic. Staying at the leading edge of technology should help it hold on to its dominant position. But the costs are high. Research and development — particularly the cost of employing ever larger numbers of engineers at Google — led to a steep increase in spending in 2018. That knocked three percentage points off operating margins, which fell to 21%. The outlay rattled investors briefly. Even so, the shares are priced at 24 times 2020's earnings, a fifth above its 10-year average. Alphabet’s results are light on detail. But its spending fits a purpose. Its experts use AI to automate marketing campaigns for small and medium-sized businesses. That will increase Google’s potential market. AI is also b...