By Sheila Dang

AUSTIN, Texas (Reuters) - Despite the buzz over generative artificial intelligence last year, the technology's impact on the advertising business of Alphabet and Meta Platforms is likely to be muted when the companies report fourth-quarter results this week, though investors are mapping out its future potential.

The search giant has rolled out AI tools that help advertisers target audiences in a less costly way and decide how their marketing budgets should be distributed across Google's ad network. Facebook parent Meta is using generative AI to create different variations of ad campaigns.

Generative AI, which can create text and photos from prompts, is still in the "hype cycle," Bernstein analysts said in a research note earlier this month, but added that investors were now looking for "incremental use cases and revenue streams to spawn from these recent advancements."

The core business of digital advertising is expected to have been resilient in the quarter ended Dec. 31, and warnings that economic and geopolitical uncertainty could dampen the ad market are likely to prove overblown, the brokerage said in a separate note last week.

Microsoft, which is scheduled to report quarterly results on Tuesday, is likely to be the earliest winner in the nascent generative AI race, which has consumed nearly every tech and social media company from Amazon.com to Snap. For Microsoft, generative AI has fueled demand for its cloud services.

Alphabet stock surged 58% last year, while Meta's stock nearly tripled. The broader S&P 500 index gained roughly a quarter in 2023, helped by an AI-fueled tech rally.

Going into 2024, "an additional catalyst ... other than AI, will be the big focus on political advertising and will boost businesses at Meta and Google," said D.A. Davidson and Co analyst Gil Luria.

Spending on political advertising in the U.S. will jump 30% this year from the last presidential election in 2020, partly driven by higher spending on digital platforms, research firm Insider Intelligence has estimated.

On Tuesday, Google parent Alphabet is expected to report that fourth-quarter advertising revenue - its mainstay - grew 11.8% to $66 billion, according to LSEG data.

Google introduced its experimental AI chatbot Bard early last year and launched what it calls a search generative experience (SGE) that generates written responses to some Google Search queries.

It rolled out SGE to 120 countries in November, but the new search experience could have very little impact on its business in the near-term.