Alphabet Stock Plunges on Search Engine Concerns Amid AI Push

Feb 09, 2023
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The market and investors are not feeling Alphabet’s Artificial Intelligence vibe despite the increased focus on revolutionary technology. The stock tumbling by more than 7% after the unveiling of Baird, the ChatGPT rival, has sent a strong message. It was the biggest drop over three months, taking the company’s stock below the $100 a share barrier. More than $100 billion in market value has already been wiped out of the stock.

Alphabet Sell-Off

Alphabet’s 7% plunge was much bigger than the 2.8% loss after the company delivered full-year results and earnings estimates that missed estimates. The sell-off was in stark contrast to Microsoft stock, which rallied by more than 4% after the software giant confirmed plans to integrate ChatGPT into its search engine Bing.

However, it did not come as a surprise. Investors and traders are increasingly shunning tech giants that are venturing into the AI space in favor of much smaller and more speculative companies. The change of heart could be attributed to the belief that the smaller companies are trading at a fair value relative to the big tech companies.

Google Search Engine Concerns

Nevertheless, the Alphabet plunge could be attributed to growing concerns that Google will be the biggest loser amid the growing push to integrate AI in search. For the longest time, Google has operated as a monopoly in the search engine business with more than 60% in market value. The dominance has allowed the company to generate significant revenue by ramping up its advertising efforts. In contrast, Microsoft has always played second fiddle with its Bing search engine struggling to gain traction.

However, there is still a cloud of uncertainty whether AI tools have what it takes to break Alphabet’s dominance in search. Analysts at Morgan Stanley are skeptical about AI tools like ChatGPT significantly impacting customer behavior and patterns in searching for items online or browsing. If the tools are not up to the task of changing human behavior, the prospect of Microsoft accruing some edge to pose significant danger on Google search are minimal.

On the other hand, Alphabet is vulnerable to losing some market share in search amid the artificial intelligence revolution partly because of its significant market share. Nevertheless, it also has the tools to counter any competition thrown at it going by the unveiling of Bard, which has the same capabilities as ChatGPT.

Artificial Intelligence Race

It is still early to declare the winner in the AI race. Until the technology significantly impacts how people operate and behave online, Google still has a chance to dominate the search engine business. Focus now shifts towards Baidu, another Chinese internet giant that has already announced plans to reveal its AI plan as it also looks to affirm dominance in China.

Away from tech giants, chip makers also have what it takes to be big winners amid the push into AI technology. NVIDIA has been one of the biggest beneficiaries of the hype as it dominates the market for chips used to power artificial intelligence capabilities. However, software makers like are also running wild in the market amid the AI push.