Alphabet Faces Threat of AI-Powered Search Engine Rivals

According to Bloomberg, Alphabet Inc., the parent company of Google, is facing the threat of competitors developing AI-powered search engines that could potentially make Google obsolete. The company's shares fell this week following news that Google's flagship AI product was struggling to compete with OpenAI's ChatGPT. Alphabet's operations generated over $100 billion in cash last year, with a significant portion going back to shareholders. However, falling behind in AI could jeopardize the nearly $200 billion in revenue Google is expected to generate from search this year. Alphabet has been among the most valuable companies in the world for most of the past decade, primarily due to the dominance of its web advertising business. Despite still dominating search, recent missteps in AI have raised questions about whether investors can rely on Alphabet to maintain its leading position. More than a year after the debut of OpenAI's ChatGPT, Alphabet is still struggling to prove that its technology can compete, despite investing heavily in the field for years. The stock has been sensitive to any sign of strength or weakness on the AI front, with investors increasingly concerned about the risks of falling behind in AI. Alphabet's stock is currently the cheapest of the biggest US technology companies at about 19 times profits projected over the next 12 months. Its outlook for revenue and profit growth over the coming year is in a league with Microsoft Corp. and far better than Apple's, even though the stock trades at a significant discount to both. Search is considered a primary use case for generative AI and chatbots, which means Alphabet's dominant market share is at risk. Microsoft, which has been incorporating AI features into Bing, has nowhere to go but up, and this factor has insulated Microsoft shares from its own AI-related concerns. However, few who follow AI are counting out Alphabet, as it has invested in the technology for years and boasts the infrastructure and engineering talent needed to develop a competing product. Getting to the point where Alphabet can integrate AI-generated answers alongside web query results could be a lengthy and expensive process. Philip Lawlor, head of market research at Wilshire Indexes, said, "They have the resources and capability to produce something credible, but we don't know if it will be a major growth driver." He added, "If you don't have a credible product, then it becomes about survivability."