Shares of Google parent Alphabet closed nearly 8 percent lower on Wednesday, wiping billions of dollars off their market value, as Wall Street digested the potential damage to its search dominance and profits from a new artificial intelligence battle with Microsoft.
The hit to the stock price comes as a result of a glitch in Google’s AI demonstration, highlighting the challenges the company faces in bringing its new conversation-based search style to the mass market.
It comes days after Microsoft unveiled a new version of its Bing search engine that incorporates AI advances including summarizing answers to search queries and generating emails and lists. In an interview with the Financial Times, Microsoft chief executive Satya Nadella explained that the company is ready to use new technologies to reduce profits in search and gross profit “will fall forever”.
“There is a margin in the search, which for us is additional. For Google no, they have to defend everything,” he added, referring to the competition against Google as “asymmetric”.
On Monday, Google said it would launch its own chatbot called Bard in an attempt to make up ground lost to rival ChatGPT, although it did not say when the service would go public.
Experts say that Bard has made a factual error in the first video demonstration from online products. An animation shared by Google shows Bard answering questions about a new discovery made via the James Webb Space Telescope, saying it “took the first image of a planet outside our solar system”.
Astronomers say this is not true, highlighting a larger problem with AI-powered searches known as large language models: that they can make factual errors and spread misinformation. One astronomer pointed out that the problem could arise from AI misinterpreting “ambiguous Nasa press releases that underestimate past history”.
The glitch highlights a common flaw with generative AI systems such as Bard, which don’t “know” the information they’re treating but instead make predictions based on probabilities. Microsoft recognizes similar challenges with chat-based services.
During an event in Paris on Wednesday, Google senior vice president Prabhakar Raghavan announced a new search feature that represented a minor update to the group’s search engine, in contrast to changes he said would come within “weeks”. These changes include new image-based searches and interactive 3D models of several cities including London and Los Angeles.
Google has been scrambling to bring its AI technology to consumer products since the launch of its new ChatGPT, which provides text-based answers to complex questions instantly rather than requiring the use of a traditional search engine.
Google reported that its ad revenue fell 4 percent in the final quarter of last year, marking only the second quarterly contraction in its history.