Google Fights Back Against Microsoft With New AI Search Capabilities

Key takeaways

• Google CEO Sundar Pichai has announced that the AI chatbot Bard is open to all, AI is coming to almost all Google products and new search experiences are on the way
• Alphabet stock soared 5%, while Microsoft also gained 1.6% before sinking back down
• Lingering concerns about AI safety remain as the two companies look to one-up each other

Google’s been arguably sleeping at the wheel for a while, but it’s finally shaken from its reverie. At a flashy developers’ conference this week, CEO Sundar Pichai revealed a string of new AI announcements designed to show that Google should be the AI frontrunner after several false starts.

It’s high time for Google to deliver a sucker punch against its main AI competitor, Microsoft. But the AI safety conversation is growing louder, which could hurt AI stocks in the future. Let’s get into the details.

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What has Google announced?

This time, Google has learned from its mistakes when it comes to a big song and dance about new AI features. At a big press event in California, its annual developers’ conference was the platform to announce the latest developments with its AI chatbot, Google Bard.

And it’s taking a big step forward: generative AI is coming to virtually every Google product, for every user. You’ll be able to draft an email, create a new presentation and create images, all with AI, in the coming weeks. Google Bard is also now widely available to English-speaking users and is set to get generative images as part of responses, which is a key differentiator from rival ChatGPT.

There’s also a major upgrade on Google search on the way, called ‘Search Generation Experience’, which runs on the new PaLM2 tech unveiled on Wednesday. After early testing found Bard to be sometimes completely making up answers, this upgrade is designed to be more accurate and conversational for users. (Think Jarvis in Iron Man.) It’s another waitlist for access, but it’s the biggest facelift Google search has gotten in 20 years.

CEO Sundar Pichai said “We are reimagining all of our core products, including search,” at the event, mentioning the word ‘AI’ 27 times. It all sounds impressive, but its main goal was to hit back at Microsoft ever since its partnership with OpenAI on ChatGPT has enjoyed an early lead in the AI wars.

What was the market reaction?

On Wednesday, Alphabet shares were up 5% at the news as Wall Street’s love affair with the new technology continues. Microsoft also benefited from the upside, with a 1.6% boost to the stock, but is now down 0.7% at the end of the week. Google, however, has largely maintained its gain.

While Google has decidedly been on the back foot throughout the AI wars, its search engine dominance is thus far unaffected. In April, Google had roughly 93% of the search engine market cornered while Bing had just 3%.

Not only does Google have the upper hand in the search engine market, but it also has the potential to boost its cloud computing offering. Amazon’s AWS and Microsoft’s Azure jointly have 55% of the market, while Google lags far behind at 11%. If Google can nail its AI proposition, we could see those figures change.

What about AI safety?

The conversation around AI safety has gotten louder as the AI wars have progressed. Most recently the “godfather of AI,” Dr Geoffrey Hinton, recently quit Google as he claimed the search engine titan had abandoned its AI safety principles to catch up with the competition.

Before this, billionaire Elon Musk – an outspoken advocate for AI safety – said he would be creating his own AI chatbot called TruthGPT, which would be regulated. He was also part of the thousands of AI experts that signed an open letter asking for AI development to be paused for six months to give everyone a chance to breathe and create proper guardrails.

So, some pretty important people are speaking out about AI safety. The question is, will Google and Microsoft listen?

Google’s place in the AI market

While Google hopes its PaLM2 technology will solve the hallucinations issue, it’s still a major gamble for the company to release AI so widely when its entire ethos is built around providing users with accurate information. But Google has to keep moving, lest it risk giving up crucial market share to competitors like Microsoft Bing.

Not to mention, Big Tech has more of an image issue than the last time a world-changing tech – social media – was born. From a consumer perspective there are serious issues around privacy, the SEC thinks there are antitrust problems and politicians are lobbying for the likes of Meta and Google to take on liability by reforming Section 230. Can they really afford to race ahead without proper guardrails?

From an investment standpoint, it’s one to keep an eye on. Google has a prime opportunity to prioritize and champion AI safety because it has such a large search engine market share. Yet if insiders speak out about how the company is abandoning those principles, it could hurt Google’s share price in the long term.

We saw Google lose $100 billion in its stock value when an early demo was found to have a factual error. As the forefather company of AI, Google has more responsibility than most to ensure its safety around AI is up to scratch – or it risks losing user trust and further share price tumbles in the future.

The bottom line

It’s hard to believe we’ve only had generative AI for six months with the release of ChatGPT in November. Since then it’s been one big race to the top, with Google’s latest play a clear message that it’s forging ahead with its AI tech, consequences be damned.

We’re (obviously) big fans of AI, and Google’s latest announcements are exciting for investors and consumers alike. But AI development must be handled correctly – and if it’s abandoning that core proposition to compete with Microsoft, it could hurt Google’s stock price.

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