Fears that OpenAI’s new search engine will challenge Google’s dominance in the near future are overblown, especially since Alphabet is already playing offense by integrating generative AI tools into its own platform. ChatGPT creator OpenAI on Thursday announced a prototype of its search engine, SearchGPT, in an attempt to compete directly with Google Search. The Microsoft-backed AI startup said SearchGPT will generate quick responses to user queries that include relevant web sources. Users will be able to ask follow-up questions to add more context with each query. OpenAI said the prototype is currently available to a small group of people for feedback. Alphabet shares fell 3.1 percent on Thursday’s news, underperforming the tech-heavy Nasdaq, which fell 0.9 percent. Shares lost about 0.3% in the Friday session and again lagged the Nasdaq, which added roughly 0.8%. Whenever there are headlines about search engine competition for Google, a “sell first, ask questions later situation” tends to play out, director of portfolio analysis Jeff Marks said during the Investing Club’s Friday morning meeting. We’re skeptical, to say the least, that this is the right strategy. Investor concerns about the proliferation of generative AI chatbots and the risk they pose to Alphabet’s core search engine business are not new. It’s been a concern since OpenAI launched ChatGPT in November 2022, taking the world by storm with its ability to produce human-written responses on all sorts of topics. GOOGL YTD Mountain Alphabet stock year-to-date performance. We closely monitor the competitive environment. However, the Google Search business continues to perform well. Just this week, Alphabet reported better-than-expected second-quarter earnings for its search division. “I don’t really see any decline in web traffic outside of web search” despite the popularity of AI chatbots, Marks said on Friday. “So maybe this threat here is also a bit exaggerated,” he continued, referring to OpenAI’s SearchGPT. After the launch of ChatGPT, the next shot at Google Search in the generative AI race came in February 2023 when Microsoft relaunched Bing as an AI-powered search engine. It barely managed to dethrone Google as a search engine By the end of June, Google’s global share was 91 percent, compared with 3.7 percent for Bing, according to Statcounter data cited by Rosenblatt analysts. That’s a slight change from the same period in 2023, when Google had 93 percent versus 2.8 percent for Bing, Rosenblatt said. said in a June 28 note to clients. While Rosenblatt described it as “emerging evidence of search share loss for Bing,” it still looks like a major lead to us — especially when paired with Alphabet’s recent efforts to incorporate generative AI into Google Search — called “Browse of AI” — is resonating with consumers, CEO Sundar Pichai said on the conference call. AI Overviews provides conversational summaries of user queries entered through the traditional search bar. “We are pleased to see the positive trends from our testing continue as we roll out AI reviews, including increases in [Google Search] usage and increased user satisfaction,” Pichai said. He added that people are seeking help on complex topics, engaging more and continuing to return for AI reviews. Pichai also said there is greater engagement from more young users aged 18 to 24. Some Wall Street analysts reiterated our view that SearchGPT is not an immediate threat to Google.“The new search engine will likely have minimal impact on Google’s search revenue,” Bank of America wrote in a note to customers on Friday, while SearchGPT may gain interest and activity on the web , analysts pointed to Alphabet’s growing revenue with its integration with artificial intelligence as a source of confidence that Google Search is the unshakable leader 2.7 billion visits per day, 28 times of visits per day on ChatGPT and 62 times more than Bing, also support Alphabet’s ability to fight the competition Views and its product halo position Google in good competition,” Citi analysts wrote to clients on Thursday. Of course, AI threats to Google Search aren’t the only issue that worries Alphabet investors. There’s also a growing debate about whether the company’s heavy investment in AI is generating adequate returns. That was one of the factors that put pressure on stocks in Wednesday’s session. Management believes that the risk of underinvestment outweighs the risk of overinvestment in this area, a view we share. (Jim Cramer’s charitable trust is long GOOGL, MSFT. See here for a full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling shares in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC, he waits 72 hours after a trade warning is issued before executing the trade. THE INFORMATION ABOVE ON INVESTING CLUB IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH OUR DISCLAIMER. NO FIDUCIARY OBLIGATION OR OBLIGATION EXISTS OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH INVESTING CLUB. NO PARTICULAR RESULT OR PROFIT IS GUARANTEED.
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Fears that OpenAI’s new search engine will challenge Google’s dominance in the near future are overblown, especially because Alphabet is already playing offense by integrating generative AI tools into its own platform.
