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Six months ago, I was using a chatbot like Siri or Alexa for simple things like asking to play a song. Now, OpenAI’s ChatGPT can do even more. And some believe it could eliminate millions of jobs and topple entire industries. Google, and consequently on Alphabet (NASDAQ: GOOGL) stock price, may be the first chapter in its firing line.
The reason this puts Alphabet’s dominance in the search engine space under threat is that in January, Microsoft (NASDAQ: MSFT) invested $10 billion in ChatGPT. The end goal is clear – use this exciting AI-driven software to make Bing a true competitor to Google.
As someone who has been tempted to pick up some shares in Alphabet, this concerns me. Although the company owns Youtube and other services, Google Search accounts for $162bn of its total revenue of $280bn.
100m daily active users
These huge figures are not surprising when I consider that Google Search Alphabet has a dominant 93% market share. While Microsoft is the closest competitor, the company’s Bing search engine has a 3% share.
To make matters worse, for years the most popular search term on Bing was Google! While the most common reason people use Microsoft products is to find competitors, I’m not too sure about that possibility here.
But after seeing the deep, helpful and human-like responses that ChatGPT can provide, maybe this AI chatbot can turn the tide.
Microsoft has integrated it into Bing. And since the integration on February 7, search engine traffic has reached 100m daily active users, approaching Google’s 1 billion figure.
Around that date, Microsoft’s stock price began to rise 18% in the past six months compared to Alphabet’s rise of 2%. I can see the difference clearly in the chart below.
How did Alphabet respond? Also, aside from issuing a ‘code red’ alert, whatever that means to a group of well-paid software engineers in California, the company has ramped up development of its own AI chat software Bard.
The successful implementation of its own version can put search engines in the same position in the ‘AI war’. But the level playing field definitely benefits Bing more than Google.
Maximum hype
If I step back, it seems the threat of AI may be at ‘maximum hype’ right now. I still remember the 3D printing mania. But the hype died down (for consumers, if not for the industry) after nobody made more than a few plastic figurines.
And there are other signs that chat AI could be a damp squib for consumers. For one, this technology is amazing, but it’s expensive.
The new version – ChatGPT-4 – costs users $20 a month to access. I can’t see a search engine with a fee like this being successful.
All in all, if I had to guess whether ChatGPT will cause problems for Alphabet I would say no. The company has a long history of providing the best search experience and I see that continuing, AI or no AI. And I think future stock prices will reflect that.
That said, this new technology is unpredictable, so I can’t open a position right now.
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