Tesla Inc., which has struggled to make any realistic claim as an AI player even as it grapples with questions about the EV market and concerns regarding Elon Musk’s leadership, is the worst-performing stock in the S&P 500 this year, sinking almost 30% as of March 20. Apple Inc. is also down, and Alphabet Inc. has underperformed the broader market. But on March 18 they both took a big jump, with the latter posting its best day since December. The reason? AI again. Bloomberg News reported that Apple was in talks to license Google’s Gemini AI engine for the iPhone.

Despite Apple’s strong showing on the Google news, some investors suggest that if Apple can’t boost its AI credibility, it will start looking uncomfortably like Coca-Cola Co.—a solid performer with reliable revenue, but lacking the hypergrowth investors demand from tech stars. Apple has “become more of a value stock,” says Phil Blancato, chief market strategist at Osaic Holdings Inc.

Similarly, Alphabet’s surge doesn’t solve its recent AI difficulties. In February, users discovered that Gemini struggled to provide accurate images of various races in historical contexts, such as requests regarding America’s Founding Fathers. That sparked conspiracy theories on social media, with some claiming Google harbors a hidden bias against White people. Sundar Pichai, Alphabet’s chief executive officer, called Gemini’s performance “completely unacceptable” and paused its generation of images of people.

Expect AI to continue to reshape the corporate landscape. Microsoft Corp.’s partnership with industry pioneer OpenAI has helped it edge out Apple as the world’s most valuable company. Microsoft now has a market value of almost $3.2 trillion, while Apple’s is $2.8 trillion—but Nvidia suddenly isn’t far behind, at $2.3 trillion.

This explains why Apple CEO Tim Cook has promised that his company will “break new ground” in AI this year. The plan is crucial to investors desperate for new growth sources. Bloomberg News has reported that Apple is planning a big announcement at its annual software developer’s conference in June, though many shareholders are losing patience and turning to stocks with a clearer path in AI, including Microsoft and Nvidia. “If you took AI out of the picture right now, and the sensationalism, would people look at Apple differently?” says Kevin Walkush, portfolio manager at Jensen Investment Management. “I think they would.”

A deal between Apple and Alphabet would build on an existing partnership that has for years seen Google pay billions of dollars annually to be the default search option in the Safari web browser. Talks between the two companies on AI collaboration remain active, but no formal announcements are expected until this summer. And Apple could still choose to work with other players—it has also held talks with OpenAI—or tap multiple partners. Apple and Google declined to comment.

Both companies could do worse than to look at Microsoft for guidance. It’s currently trading near a record high, but when Satya Nadella took over in 2014, it was considered an outdated software maker with a 20th century mindset and a languishing share price. Now the company that gave Windows to the world is everywhere, from the cloud to AI. “Microsoft finally got going,” says Mark Lehmann, CEO at Citizens JMP Securities LLC. “But it took them 15 years to figure it out.”

Microsoft has agreed to pay AI startup Inflection about $650 million in cash in an unusual deal that would allow Microsoft to use Inflection's models and hire most of the startup's staff including its co-founders, a person familiar with the matter told Reuters on Thursday.

The high-profile AI startup's models will be available on Microsoft's Azure cloud service, the source said. Inflection is using the licensing fee to pay Greylock, Dragoneer and some other investors, the source added, saying the investors will get a return of 1.5 times what they invested.

Microsoft hired Inflection co-founders Mustafa Suleyman and Karen Simonyan on Tuesday, along with most of the 70-person team at the AI firm, for a newly created consumer AI unit called Microsoft AI. The leading software company has been looking to consolidate and expand its AI offerings for consumer products.

Suleyman will be CEO of the unit, while Simonyan will join as chief scientist. Other employees, including Inflection's vice president of engineering, have also joined Microsoft, according to LinkedIn profiles.

Microsoft declined to comment, while Inflection AI did not immediately respond to a Reuters request for comment.

The details about the deal was originally reported on Thursday by the Information.

Inflection AI has emerged as one of the most high-flying names in generative AI after raising $1.3 billion from Microsoft and Nvidia in a mix of cash and cloud credit at a valuation of $4 billion in June. It has built its own foundation models and runs a chatbot called Pi, which it said has more than 1 million daily active users earlier this month.