When Google-parent Alphabet Inc. reported eye-popping earnings last week its executives couldn’t stop talking up the company’s investments in machine learning and artificial intelligence.

For any other company that would be a wonky distraction from its core business. At Google, the two are intertwined. Artificial intelligence sits at the extreme end of machine learning, which sees people create software that can learn about the world. Google has been one of the biggest corporate sponsors of AI, and has invested heavily in it for videos, speech, translation and, recently, search.

For the past few months, a “very large fraction” of the millions of queries a second that people type into the company’s search engine have been interpreted by an artificial intelligence system, nicknamed RankBrain, said Greg Corrado, a senior research scientist with the company, outlining for the first time the emerging role of AI in search.

RankBrain uses artificial intelligence to embed vast amounts of written language into mathematical entities -- called vectors -- that the computer can understand. If RankBrain sees a word or phrase it isn’t familiar with, the machine can make a guess as to what words or phrases might have a similar meaning and filter the result accordingly, making it more effective at handling never-before-seen search queries.

David Fuller's view

I felt fortunate to grow up with dictionaries and encyclopaedias.  However, in the search for information, nothing has been as efficient, comprehensive and accurate as Google over at least the last fifteen years.  It seems to know everything but the future, and I have joked about its seemingly god-given capabilities.  I probably use a Google search at least ten to twenty times a day, and would feel deprived without it.  

Google’s share performance is interesting because with a generally high P/E and no dividend, it does tend to fall out of favour for lengthy periods.  For instance, it ranged between 2010 until 3Q 2012, underperforming many US shares in the process before nearly doubling once again. 

However, Google peaked in late February 2014 and ranged mostly between $600 and $500 for seventeen months, before racing above $700 in July of this year following a promise to curb spending on risky projects.  

Google then pulled back twice during Wall Street’s corrective phase, finding support near the upper side of its previous lengthy trading range and also from the rising 200-day (40-week) MA.  Google has maintained its 2H 2015 relative strength by breaking to new highs before US indices.  This suggests that it is also likely to remain in form over the next few months, despite an estimated P/E of 25.26 and no Yield.