Gene Munster: Alphabet and OpenAI Can Both Build Massive AI Ad Businesses

AI Advertising Landscape

• 💡 Gene Munster believes both OpenAI and Google (Alphabet) can develop substantial advertising businesses within the AI space, a rare scenario where both companies can win.
• 🎯 This outlook is based on changing consumer behavior, with users increasingly understanding that chatbots and search can provide more comprehensive information.
• 📈 The time spent on information seeking, whether through traditional search or bots, is on the rise, indicating growth potential for both platforms.

AI Trade Hurdles and Capex Guidance

• 🚀 Munster identifies capex guidance as the next significant hurdle for the AI trade, with analyst expectations for hyperscaler growth in 2026 increasing.
• 📊 He predicts that capex numbers will likely exceed 40%, driven by the massive buildout of AI infrastructure.
• 🧠 The conversation around AI infrastructure is often focused on training, but Munster emphasizes the larger potential of the inference market, which is already significantly larger than the training market and could grow exponentially.

Small Cap Outperformance in AI

• 📈 Munster stands by his December prediction that small caps will outperform large caps in the AI sector.
• 🧩 This thesis is supported by the mathematical expectation that smaller companies should see greater earnings revisions if the inference market continues to grow.
• ✅ He remains a believer in tech broadly, highlighting Apple and Google as strong performers in the first half of the year and throughout the year, respectively, but sees continued momentum in the small-cap AI trade.