Google stock drops about 3% amid concerns about AI competitiveness
Alphabet stock (GOOG, GOOGL) is down today about 3% amid mounting concerns about the Google parent's ability to compete in the AI arms race.
ChatGPT's success has kicked off a mad dash in tech to get AI right, and Microsoft's (MSFT) $10 billion stake in ChatGPT's maker OpenAI has turned the heat up even further. Big Tech's other biggest names, from Meta (META) to Amazon (AMZN), have thrown their hats into the ring. That said, for Google, the AI race is particularly existential.
Search has been at the center of Google's business for more than two decades and, in the past, Google's AI credibility would have been hard to question. However, the company has struggled over the last few months to prove that it has what it takes to move AI search into its future — and subsequently, people are beginning to take competing search engines more seriously.
On Sunday, The New York Times reported that Google is looking to make "radical" changes to its search offerings, facilitated by the news that major companies like Samsung are considering switching to Microsoft's new version of Bing.
The fact it's Samsung particularly matters here. Google's relationship to Samsung is key, since all Samsung phones run on an Android operating system, or OS, and Android remains the most popular smartphone OS in the world. But that dominance in no small part is due to the devotion of companies like Samsung to Google's tech.
This also isn't the first time this year that Google's stock has taken a hit in conjunction with fears about the company's AI innovation and capabilities. In February, shares dropped in the aftermath of the company's AI presentation, which was received as underwhelming by investors. The event was just a day after Microsoft revealed its newly-resurrected, ChatGPT-integrated version of Bing, which subsequently passed 100 million daily active users in March. After years of insignificance, Bing was back, and Google had to take notice.
There is, of course, still a long way to go for Bing to hit the heights of Google Search, which still processes billions of searches each day. However, investors keep asking — and today's stock drop is the latest iteration of this — why it seems like they're falling behind.
It's a question that Needham analyst Laura Martin has been asking for months, most recently in an April 3 note: "The hardest question we get from investors is: How could any company launch a consumer-facing AI product before GOOGL, given its AI lead? GOOGL has about 130,000 FTEs, 30,000 software engineers globally, and 10,000 AI engineers making an average of $200,000 each, according to Glassdoor ... How did OpenAI get the jump on GOOGL with its ChatGPT product?"
Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.
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