OpenAI, the creator of ChatGPT, announced a prototype of its search engine, SearchGPT, which aims to directly compete with Google Search. The Microsoft-backed AI startup stated that SearchGPT will generate quick responses to user queries with relevant sources from the web. OpenAI is currently testing the prototype with a small group of people for feedback. The news of the SearchGPT prototype caused Alphabet shares to fall by 3.1% on Thursday, underperforming the Nasdaq.
Investor concerns about the potential threat that generative AI chatbots pose to Alphabet’s core search-engine business are not new. This worry has been present since the success of OpenAI’s ChatGPT in November 2022. Despite the popularity of AI chatbots, Alphabet’s Google Search business continues to perform well, with better-than-expected second-quarter revenue reported recently. There has been no decline in web traffic away from web search, contrary to some expectations, indicating that the threat posed by SearchGPT may be overblown.
Microsoft’s relaunch of Bing as an AI-powered search engine in February 2023 also failed to significantly impact Google’s search-engine dominance. Google still maintains a commanding lead in the search engine market, with a worldwide share of 91% compared to Bing’s 3.7%. Alphabet’s efforts to integrate generative AI into Google Search through features like “AI Overviews” have been well-received by users, leading to increased engagement and user satisfaction. CEO Sundar Pichai noted positive trends in user engagement with AI Overviews.
Wall Street analysts generally do not see SearchGPT as an immediate threat to Google’s search revenue. While SearchGPT may attract interest and activity, analysts remain confident in Google Search’s position as the industry leader. Google’s web traffic far surpasses that of ChatGPT and Bing, with 2.7 billion daily visits compared to their significantly lower numbers. Analysts believe that Alphabet’s ongoing investments in AI integration, such as AI Overviews, position Google well to compete in the evolving search engine landscape.
Despite concerns about potential AI threats to Google Search, Alphabet investors also question whether the company’s heavy investments in AI are generating sufficient returns. Alphabet’s management believes that the risk of underinvesting in AI is greater than the risk of overinvesting. Some analysts view Alphabet’s products like Gemini, AI Overviews, and its overall product strategy as strong competitive advantages that can help fend off competition in the search market. Overall, while the emergence of generative AI tools like SearchGPT may add to the competitive landscape, Google’s dominant position and ongoing innovations in AI integration give it a solid footing in the market.
