Feb 8, 2023
Alphabet Falls Most in Three Months on Bard Accuracy Concerns
(Bloomberg) -- Google owner Alphabet Inc. fell by the most in more than three months after a demonstration of its new artificial intelligence chatbot, Bard, sparked concerns that the tech giant has lost ground in the race for the future of internet search.
Google has been under pressure since developer OpenAI launched its wildly popular chatbot, ChatGPT, which many in the tech industry tout as the next generation of search. On Tuesday, Microsoft Corp., which is investing billions in OpenAI, unveiled a new version of its Bing search engine and Edge browser incorporating technology from the AI startup. On Wednesday, Google hosted a news conference in Paris where it shared more details about its progress integrating artificial intelligence into search.
Investors were largely underwhelmed by the demonstration. In one instance, Bard was asked about new discoveries from the James Webb Space Telescope. In one of its responses, Bard said the telescope was used to take the first pictures of a planet outside the Earth’s solar system — but NASA says those were actually taken by a different telescope.
For now, Bard is available only to a limited number of trusted testers, and OpenAI’s ChatGPT has also been found to deliver inaccurate or outdated responses. Yet investors are keenly attuned to any threat to Google’s search business, which remains its lifeblood.
“That is why you see such a reaction, because this is the money generator, the cash cow in Alphabet’s portfolio,” said Mandeep Singh, an analyst with Bloomberg Intelligence.
Google said in a statement that Bard’s response “highlights the importance of a rigorous testing process.” The company said it will combine external feedback with its own internal testing to ensure Bard’s responses “meet a high bar for quality, safety and groundedness in real-world information.”
Read More: ChatGPT Reignites the Search Wars Between Google and Microsoft
Alphabet declined 7.4% to $99.67 at 1:09 p.m. New York time on Wednesday. Earlier, the shares fell as much as 8.9%, the biggest drop since Oct. 26.
Last year, Google declared a “code red” in response to ChatGPT’s release — a move akin to pulling a fire alarm internally, which sent the company’s AI engineers scrambling for a response. Bard’s imperfect performance on the public stage suggests the company may have felt pressure to show off the technology before it was ready, Singh said.
“They did this in haste,” Singh said. “You don’t expect it from a company that is so dominant, and really has always been able to fend off any challenges as far as their core search business.”
While Microsoft won the narrative this week, Google’s longstanding investments in artificial intelligence will ultimately pay off, said Gene Munster, co-founder and managing partner at Deepwater Asset Management.
“Right now the snapshot is: advantage Microsoft,” Munster said. “However, we still think the long-term advantage should go to Alphabet given the resources it has put into AI over the past six years.”
--With assistance from Divya Balji and Ryan Vlastelica.
(Updates with additional context on AI chatbots starting in fourth paragraph.)
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