Long entrenched as the dominant search platform, the Google ecosystem under Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) now faces perhaps its most serious test yet. According to a report by The New York Times, Samsung (OTCMKTS:SSNLF) may be considering a competitive pivot. As a result, investors sensing rising competition are exiting GOOG stock. Shares are down about 3% as of this writing.
According to the NYT report, Samsung may be on the verge of replacing Google with Microsoft’s (NASDAQ:MSFT) Bing as the default search engine on its devices. Microsoft recently integrated popular chatbot ChatGPT into its search engine. Allegedly, this has Google higher-ups panicked, as the enterprise earns approximately $3 billion in annual revenue from Samsung alone. Overall, Google Search represents a $162 billion-annual business.
A possible domino effect is also sparking concerns for Alphabet. That’s because Google has another $20 billion aligned with consumer tech giant Apple (NASDAQ:AAPL) on a similar contract. That agreement will be up for renewal this year.
To be clear, the contract between Alphabet and Samsung is still under negotiation. So, it’s possible that the latter sticks with the former. With the artificial intelligence (AI) arms race picking up steam, Google has also begun working on several projects to update and refresh its services.
Concerns Are Rising for GOOG Stock, But There’s No Need to Panic Yet
Publicly, Alphabet is putting on a brave face. Google is “excited about bringing new AI-powered features to search and will share more details soon,” per Google spokeswoman Lara Levin. However, the company did not issue a comment on its negotiations with Samsung. While this appears to be a challenging situation for GOOG stock, the evidence doesn’t point to a need for panic yet.
Critics may say that Alphabet has become complacent with its Google ecosystem, having long-dominated market share for internet search engines. It’s also true that the company suffered a $100 billion loss in market value in early February on concerns over its new Bard chatbot.
Nevertheless, investors should also consider the other side of the equation: ChatGPT is hardly perfect. In a rather unflattering assessment of the popular AI platform’s shortcomings, Morgan Stanley analysts wrote the following:
“When we talk of high-accuracy task, it is worth mentioning that ChatGPT sometimes hallucinates and can generate answers that are seemingly convincing, but are actually wrong.”
Ironically, AI in its present, fallible state underscores the necessity of human operation. That was part of the message behind Google CEO Sundar Pichai’s concerns about a no-holds-barred competition in the AI space:
“We don’t have all the answers there yet, and the technology is moving fast. So does that keep me up at night? Absolutely.”
Why It Matters
Academics have been warning about the rise of misinformation for years and there has never been a more pressing need for truth and accuracy in context. Therefore, ChatGPT’s known mistakes may pose technical and even moral dilemmas for would-be platform integrators. Here, GOOG stock may have an advantage, especially as its underlying search ecosystem allows users to consider the best information among several search results.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
