Google stock falls about 3% amid concerns about AI competitiveness

Alphabet (GOOG, GOOGL) shares are down about 3% today amid growing concerns about parent Google’s ability to compete in the AI ​​arms race.

ChatGPT’s success started a mad rush in technology to get AI right, and Microsoft’s ( MSFT ) $10 billion bet in ChatGPT maker OpenAI has turned up the heat even more. Other big names of Big Tech, 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 core of Google’s business for over two decades and, in the past, it would have been hard to question the credibility of Google’s AI. However, the company has been struggling in recent months to prove that it has what it takes to move AI search into its future – after which people are starting 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 news that major companies like Samsung are considering switching to Microsoft’s new version of Bing.

The fact that Samsung is here is particularly important. Google’s relationship with Samsung is crucial, since all Samsung phones run on the Android operating system, or OS, and Android remains the most popular smartphone OS in the world. But that dominance is largely due to the enthusiasm of companies like Samsung for Google’s technology.

It’s also not the first time this year that Google’s stock has been hit at the same time as concerns about the company’s innovation and AI capabilities. In February, shares fell after the company’s AI presentation, which investors found to be a letdown. The event was just a day after Microsoft unveiled its newly resurrected, ChatGPT-integrated version of Bing, which hit 100 million daily active users in March. After years of insignificance, Bing was back, and Google had to take notice.

Of course, Bing still has a long way to go before it catches up to Google Search, which processes billions of searches every day. However, investors are still wondering – and today’s stock drop is the latest iteration of this – why they seem to be falling behind.

It’s a question Needham analyst Laura Martin has been asking for months, most recently in an April 3 note: “The toughest question we get from investors is: How could any company launch an AI product before GOOGL, given a lead AI ? GOOGL has about 130,000 FTEs, 30,000 software engineers worldwide, and 10,000 AI engineers making an average of $200,000, according to Glassdoor … How did OpenAI get the jump on GOOGL with its ChatGPT product?”

Allie Garfinkle is a Senior Technical Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.

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