Google sent shockwaves through a small corner of the artificial intelligence (AI) market when it released new research that could significantly impact certain chipmakers. The Alphabet (GOOG +2.92%) (GOOGL +2.53%) subsidiary shared the results of its TurboQuant algorithm, which shrinks memory usage for large language model inference more than six-fold, the researchers said.
Memory chipmakers have seen demand surge over the past year as the amount of data that graphics processing units (GPUs) and other AI accelerators have immediate access to proves to be a significant bottleneck in improving generative AI responses. With Google's breakthrough, it might not be such a bottleneck after all. But investors' buying and selling behaviors may be misplaced after the news. One stock could end up being a surprising winner of Google's AI development.
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Did memory chipmakers deserve a price cut?
Shares of Micron (MU +4.04%), the leading U.S. memory chipmaker, and its Korean competitors SK Hynix and Samsung, all fell on the news of Google's TurboQuant. If AI chips can produce better results with less memory, the demand for memory won't grow nearly as quickly, the thinking goes.
But improving efficiency shouldn't cause such alarm. TurboQuant opens the door for more advanced models using larger context windows to further improve responses and user experiences. Overall, the net effect should be relatively neutral in the long run. We saw a similar response in the market when DeepSeek unveiled its reasoning model a year ago. In fact, Cloudflare CEO Matthew Prince called TurboQuant "Google's DeepSeek."
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In other words, investors shouldn't fear the impact of TurboQuant on long-term demand for memory chips. Google isn't the only company working to solve this challenge, and it's unlikely it'll stop trying to optimize for memory usage going forward. That said, there are reasons to be wary of Micron stock at its current share price, even after the recent pullback. The cyclical nature of the memory chip market can lead to significant drops in earnings, and Google's release certainly won't help.
The surprise winner from Google's AI advancement
Improving the memory efficiency of AI algorithms won't have much impact on the most advanced frontier models driving artificial intelligence forward. However, it could have a noticeable impact on models used on consumer devices like smartphones and laptops, which are much more constrained by their hardware. As such, Apple (AAPL +1.18%) could be a surprise winner from Google's TurboQuant.
Apple has struggled to develop a large language model capable of handling significant tasks on the iPhone. The company values data privacy and security, so it wants to send as little user data as possible to a remote server. But that severely limits the AI capabilities it can include in the iPhone. That has resulted in multiple delays of the long-promised Siri update with new generative AI features.
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But the TurboQuant breakthrough could enable much more on-device AI processing, as memory has been a major bottleneck for Apple's devices. It's the reason older iPhone models haven't received basic Apple Intelligence features like AI-generated emojis in iMessage.
Google could be the key to unlocking generative AI features for the iPhone. Apple has already announced a partnership with Google to use its Gemini frontier model for an updated Siri. It'll likely be able to get much more out of it by integrating Google's memory optimizations on its devices.
That could spur a massive upgrade cycle for the iPhone. Nearly 1 billion iPhones in use at the end of 2025 are incapable of running Apple Intelligence, according to CLSA analysts. If new Siri features convince even a fraction of those users to upgrade earlier than normal, Apple could see a huge surge in iPhone sales this fall. Continued AI improvements driven by efficiencies unlocked by Google could drive more upgrades throughout 2027.
Investors already have high expectations for Apple this year, with the stock trading for nearly 30 times forward earnings expectations. But more advanced AI capabilities on its devices could lead to significant upside for the stock.
