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In less time than it takes for Saturn to orbit the sun, Google (NASDAQ:GOOG) (NASDAQ:Google) has grown from a humble Stanford University research project to a giant technology company valued at more than $1.70. Trillion.
But as generative artificial intelligence appears to be about to be reshaped, Some wonder whether the world’s search engines are in danger of losing their mountaintop status in every sector of the global economy.
“Since OpenAI launched ChatGPT in late 2022, Google’s response has been like a bodybuilder getting punched after being told that his muscles are for show,” Bernstein analyst Mark Schmulik said. wrote in a recent note to investors. Shmulik has a Market-Perform rating on Google and he has a price target of $160.
Ever since ChatGPT and OpenAI, backed by billions of dollars from Microsoft (MSFT), took the world by storm in late 2022, Google has been accused of shipping products too slowly (despite disastrous results). However, the pace has been increasing recently). Shmulik said he was playing defense, not offense.
The company isn’t giving investors “anything more than the bare minimum,” Shmulik added.
Google, led by CEO Sundar Pichai, has not provided guidance. Commentary on various markets is often considered “mysterious.” And the question-and-answer portion of the earnings call is a “waste of time,” Shmulik said. While that idea has worked for most of the past 20 years (the company went public in his 2004), Stock nearly 5,000% Things have changed dramatically in the last few years since the IPO.
Generative AI isn’t the only risk in search
Perhaps the biggest risk to Google (besides breakup and antitrust issues) is losing its dominance in the lucrative search engine market.
The company generated approximately $237 billion in advertising revenue in 2023, most of which came from search. With about 91% of the market, Google is clearly his 800-pound gorilla, and other companies are rushing to follow suit.
Microsoft is integrating generative AI and OpenAI technologies into all of its products, including Bing. ChatGPT itself is consistently one of the top 10 free apps on the iOS App Store, while other generational AI companies have received significant attention from investors.
Companies like Meta (META), Amazon (AMZN), and Pinterest (PINS) are also following Google’s lead, as vertical search (or specialized search) and social search are as big a threat to Google as generative AI. Shmulik said.
Google is trying to counter the threat of generative AI with its products, particularly Gemini.
However, Gemini (previously known as Bard) has had issues in recent days, including last month when it provided responses that made some users uncomfortable, and the company has been forced to issue a temporary response to AI-generated images. I was forced to stop.
Pichai called the results “totally unacceptable” and said the company would restart its AI model in the coming weeks.
All’s Well That Ends Well?
While Google’s stock price has been punished by the launch of poor-quality generative AI products and the announcements of competitors, Google’s share of the search market remains intact, at least not yet. The company’s search market share has remained relatively stable at about 91% over the past 12 months, according to StatCounter.
Shmulik said that despite the self-inflicted harm coming from within Google, that provides some comfort.
“We believe that once Gen AI’s answers gain consumer trust, Google should be in the best position to integrate these results with web query results and offer consumers the best of both worlds. I continue to believe,” Schmulik said.
