OpenAI recently announced a prototype of its search engine, SearchGPT, in a move to directly compete with Google Search. The Microsoft-backed AI startup stated that SearchGPT will provide quick responses to user queries with relevant sources from the web. Users will also be able to ask follow-up questions to add more context to their queries. Despite fears that OpenAI’s search engine could challenge Google, Alphabet has been proactive in integrating generative AI tools into their platform to stay ahead in the game.
Investor concerns about the potential threat of generative AI chatbots to Alphabet’s core search-engine business have been ongoing since OpenAI released ChatGPT in 2022. However, Google’s Search business continues to perform well, with no decline in web traffic reported despite the increasing popularity of AI chatbots. With Alphabet reporting better-than-expected revenue for its search unit in the second quarter, it is clear that the company is holding its ground against emerging threats.
In the generative AI race, Microsoft made a move in February 2023 by relaunching Bing as an AI-powered search engine. Despite this, Google still maintains a dominant position with a worldwide share of 91% compared to Bing’s 3.7% in the 10 weeks ending in June. While there may be some evidence of search share loss to Bing, Alphabet’s efforts to incorporate generative AI into Google Search with “AI Overviews” have been well-received by users, leading to increased engagement and satisfaction.
Some analysts believe that OpenAI’s SearchGPT will have minimal impact on Google’s search revenue. Google’s growing revenues with its AI integration, along with the company’s massive web traffic, indicate that Google Search continues to be the leader in the search engine market. Wall Street analysts are confident in Alphabet’s ability to fend off competition and maintain its position as the unshakable leader in the industry.
Beyond the threat of generative AI to Google Search, there are other questions on Alphabet investors’ minds, such as whether the company’s heavy investments into AI are generating sufficient returns. Management believes that the risk of underinvesting in AI is greater than the risk of overinvesting, aligning with the view that Alphabet’s ongoing investments in AI will position the company well for future competition. As Alphabet continues to innovate and adapt to changing market dynamics, it remains a strong player in the search engine landscape.
