Stocktake: Have investors overreacted to Microsoft’s ChatGPT threat to Google?

Investors in Google parent Alphabet are spooked by the threat posed by Microsoft-backed ChatGPT, the artificial intelligence (AI) sensation taking the tech world by storm. Alphabet shares lost $100 billion (€93.4 billion) in market value last Wednesday after Google’s own chatbot, Bard, made an error in a promotional video.

It was an embarrassing start for Bard, but some wondered if this was a $100 billion error, or a wild market overreaction. “People aren’t even looking at the fundamentals,” one strategist said. Google’s AI technology is “at least as good” as the competition, said Evercore analysts. Google would “defend its market position in the long run”. Analysts’ pleas for caution were echoed by others, only for shares to sink another 5 per cent on Thursday.

[ Alphabet shares lose €93bn in value after Google chatbot gets satellite question wrong ]

Initial reaction aside, one can understand investors’ concerns. Whereas Microsoft has diversified income streams, Google’s search business remains hugely important, accounting for roughly half its revenues. For years, Google has dominated this space, but Microsoft’s incorporation of ChatGPT into its Bing search engine means it may finally compete for market share. Even if Google wins the AI wars, the greater efficiency of AI searches will result in fewer inquiries per user, and, consequently, less income. Investors may have overreacted last week – we shall see – but Google’s future looks less certain than before.