To The Moon

ChatGPT Sparked an AI Craze. Investors Need a Long-Term Plan

It has been more than 70 years since the English computer scientist Alan Turing wrote a landmark paper laying out the Turing Test for assessing whether machines can think.

It turns out that a better question is whether they can sell advertising.

Over the past two months, Wall Street has become preoccupied with ChatGPT, the now very popular chatbot from start-up OpenAI. ChatGPT launched on Nov. 30 as a free service, and the world has been dazzled by its ability to answer questions and create original materials, generating everything from letters and resumes to computer code and Shakespearean-style sonnets. ChatGPT reached more than 100 million users in January, hitting that milestone even faster than TikTok.

The viral success has spurred questions across Wall Street about how tech titans would respond. $Microsoft(MSFT)$ , which made an initial investment in OpenAI in 2019, recently agreed to boost its stake by $10 billion, spurring speculation about how the software giant would fold so-called generative artificial intelligence into its products.

We got the answer this past week. On Tuesday, Microsoft unveiled a new version of its Bing search engine, infused with natural-language capability from OpenAI. The implications were market-shaking, mostly for Google parent $Alphabet(GOOGL)$ $Alphabet(GOOG)$ , which could see its dominance in internet search challenged for the first time in decades.

A day before Microsoft's announcement, Google unveiled its own AI-based chatbot, called Bard. The company also intends to add generative AI functionality to its own core search engine. This past Wednesday, Alphabet hosted a low-key search-related event in Paris to show off AI-related updates to maps, image search, and language translation. But the market came away uninspired.

Some observers noted a small error in one of the Bard search examples, which had said that the first photograph of an exoplanet was taken by the Webb space telescope. That isn't accurate. Also noted by many: While Microsoft CEO Nadella led the Bing launch, Alphabet CEO Sundar Pichai didn't participate in Google's Paris event. It was, one fund manager said, a Bard bust.

Analysts and investors spent the rest of the week debating a once impossible idea: that a newly energized Bing, which rolled out in 2009, could shift the balance of power in the internet search market.

Google currently controls 93% of the search market, versus just 3% for Bing, according to Statcounter. Google, as a result, has near-total domination of search-related advertising. The company is currently fighting a pair of Justice Department lawsuits charging that the company's search and advertising businesses violate federal antitrust law. The first suit, filed in 2020, focuses specifically on search. It goes to trial later this year. Just a few weeks ago, the government filed a second case, this time related to the online advertising market. Investors appear to be less worried about the litigation, though, than they are about the potential that Google might lose some of its search prowess to an AI-powered version of Bing.

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