The keyword of the year in markets has been AI, and besides Nvidia (NVDA), whose chips power most of the AI-related applications, two of the most high-profile companies competing in the sector have been Alphabet (GOOGL) and Microsoft (MSFT). Most people forget, but it was back in 2016, six years before Chat-GPT even came out, that Alphabet CEO Sundar Pichai declared that Google was an “AI-first company”. Pichai may have been ahead of the game, but when Chat-GPT first launched late last year, it was MSFT that found itself in the pole position while the consensus quickly declared that Alphabet missed the boat on AI. This sentiment was reinforced throughout the year as there were numerous points where Alphabet made negative headlines due to its shortcomings in AI.

Given the headlines, you’d think that the amount of daylight between the performance of MSFT and GOOGL this year would be wide, but the charts say otherwise. As shown in the charts below, they’re both on pace to close out the year right near their highs, and it’s GOOGL that is closer to a new high. Not only that but on a YTD basis, it’s GOOGL (58.99%) that is outperforming MSFT (54.9%) rather than the other way around.

To be fair, since the launch of Chat-GPT on 11/30/22, MSFT is still outperforming GOOGL, but the gap between them has been narrowing. With MSFT up 45.5% and GOOGL up 38.8% since Chat-GPT introduced itself to the world, less than seven percentage points separates the two stocks. What’s notable about the performance of the two during this time is that while MSFT has been in the lead most of the time, there have been multiple periods where the lead shifted between the two. The AI race between GOOGL and MSFT has been a lot closer than this year’s headlines would have you believe.

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