Six months ago, I’d use a chatbot like Siri or Alexa for simple stuff like asking it to play a song. Now, OpenAI’s ChatGPT can do so much more. And some believe it could do away with millions of jobs and overturn entire industries. Google, and consequently the Alphabet (NASDAQ: GOOGL) share price, might just be the first thing 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 $10bn in ChatGPT. The end goal was obvious — to use this exciting AI-driven software to make Bing a true competitor to Google.
As someone who’s been tempted to pick up a few shares in Alphabet, this concerned me. Even though the company has Youtube and other services, Google Search accounts for $162bn of its $280bn total revenue.
100m daily active users
Those huge figures are hardly surprising when I consider that Alphabet’s Google Search has a dominant 93% market share. While Microsoft is its closest competitor, the firm’s Bing search engine has a paltry 3% share.
Making things even worse, for years the most popular search word in Bing has been Google! When the most common reason people use Microsoft’s product is to find its competitor, I’m not exactly optimistic about its chances here.
But having seen the in-depth, helpful and mind-bogglingly human-sounding responses that ChatGPT can give, perhaps this AI chatbot can turn the tide.
Microsoft has integrated it into Bing already. And since its integration on February 7, the search engine’s traffic has shot up to 100m daily active users, inching closer to Google’s figure of 1bn.
Around that date, the Microsoft share price began a climb that saw it up 18% over the last six months compared to Alphabet being up 2%. I can see the difference clearly in the following graph.
How has Alphabet responded? Well, 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.
A successful implementation of its own version might put its search engine on an equal footing in the ‘AI wars’. But a level playing field definitely benefits Bing more than Google.
Maximum hype
If I take a step back, it seems like the AI threat might be at ‘maximum hype’ right now. I still remember the 3D printing mania. But the hype for that died down (for consumers, if not for industry) after nobody seemed to create much more than a few plastic figurines.
And there are other signs that AI chat might turn out to be a damp squib for consumers. For one, the 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 this kind of fee having any success.
All in all, if I had to guess whether ChatGPT will cause problems for Alphabet I’d say no. The firm has a long history of providing the best search experience and I see that continuing, AI or no AI. And I think its future share price will reflect that.
That said, these new technologies are so unpredictable that it puts me off opening a position for now.
