Google has long been the leader in online search, and its dominance has been unrivaled for years. However, the rapidly growing use of OpenAI’s ChatGPT has caused many investors to question if this might be the beginning of a transition of power. Over the course of this year, the Alphabet Inc- the parent company of Google, has seen its stock shares rise 20%. This is due in part to the recovery of technology stocks. Despite this, the company has also experienced multiple sharp drops in stock value due to fears that its clicks will decrease in the face of competition from Microsoft’s Bing search engine.
This decline was put in full swing after reports of Samsung Electronics considering replacing Google with Bing as the default search engine on its devices. It was followed by a 12% decline over two days in February after Google’s own chatbot ‘Bard’ service had some issues with accuracy. In an effort to better its progress in artificial intelligence (AI), Alphabet began consolidating its AI research groups into one unit.
According to Statista data, Google is far out struggling competitors, as it has nearly 85% of worldwide market share in internet search, while Bing is still at 8.9%. It also receives a higher share of revenue from online search and advertising than Microsoft. Nonetheless, Michael Lipert the Portfolio Manager at the Baron Opportunity Fund is worried that chatbots could have a significant effect on Alphabet’s otherwise massive share of the search market. Lippert has since gone on to reduce his exposure to Alphabet.
The competition for market share could continue to hurt sentiment, given the current state of the macro economy. Alphabet still remains well positioned for the long term, with its projection of maintain its current market share, but it still has much to lose. Another significant strength of Alphabet is its valuation which measures up to being the cheapest of the four biggest technology and internet stocks, this includes Apple Inc. and Amazon.com Inc., in addition to Microsoft.
Alphabet’s search engine has been particularly profitable, generating more than $160 billion in sales last year. Although AI technology is still yet to become a major driver of that revenue, it is unlikely to slow down Alphabet’s progress anytime soon.
Regarding the companies and individuals mentioned in the article, Alphabet is an American multinational conglomerate headquartered in California, best known as the parent company of Google. Sundar Pichai is the Chief Executive Officer of Alphabet. He formerly held the roles of Senior Vice President of Chrome, Google Apps and Google’s Product boss.
