The substitute intelligence (AI) revolution appears to have handed the Vodafone Group (LSE: VOD) share price by.

Within the US, AI-related shares like Nvidia and Alphabet are hovering. However Vodafone shares have fallen greater than 50% previously 5 years. I feel that might change, and it’s all to do with Alphabet, the Google holding firm.

Billion greenback+

On Wednesday (8 October), Vodafone introduced a 10-year extension to its strategic partnership with Google.

As a part of the brand new deal, mentioned to be price greater than $1bn, “Vodafone will develop entry to Google’s AI-powered Pixel gadgets with its quick 5G community in Europe, and proceed selling the Android ecosystem“.

It ought to enhance Vodafone TV, with entry to Google Cloud’s gen AI. And it means Vodafone ought to have the ability to supply Google One AI Premium subscription plans in some areas by 2025.

CEO Margherita Della Valle mentioned: “Vodafone and Google will put new AI-powered content and devices into the hands of millions… more consumers.”

Picks and shovels

The AI focus lately appears to be totally on these corporations on the sharp finish. It’s those growing the precise AI software program, and people offering the chips and different {hardware} it runs on. That features issues like Tesla‘s automobiles.

However the progress of AI goes to position heavy calls for on two key commodities, vitality and bandwidth. Vitality is already massive on folks’s minds, particularly with our payments climbing and oil costs booming.

However do we actually have a full grasp of the communications capability that AI know-how might soak up within the coming many years?

Rival BT Group says it’s already handed peak capital expenditure for its fibre broadband rollout. So the money circulate scenario there might properly be at a pivotal level.

And the BT share price already appears to be gathering a little bit of power. Vodafone remains to be down although.

When will it flip?

My primary concern, I feel, is that Vodafone, in its personal transformation, doesn’t appear to be it’s but reached the “inflection point” that BT spoke of.

Whereas BT’s dividend seems to be extra dependable than it has been in some years, Vodafone’s is ready to be slashed by half in 2025. That would go away each yields related, at across the 5.5% mark.

However the truth that Vodafone let issues go to such a degree {that a} transfer like that was wanted didn’t do lots for confidence.

Della Valle’s shake-up is, for my part, precisely what Vodafone wanted. However there’s loads extra to do.

Tight on money

Within the 2023-24 full yr, Vodafone’s adjusted free money circulate dropped by 37%, to €2.6bn. And web debt reached €33.2bn. The corporate’s web debt to EBITDAaL (a non-standard EBITDA measure) is worse than BT’s, at round thrice.

A part of me thinks Vodafone might certainly be set for a pivot level a while within the subsequent few years. And optimistic actions in money circulate, web debt, and return on capital, might make it look good.

However one other facet of me thinks BT could possibly be the higher comms inventory to think about proper now, even with its personal debt-related dangers.