Alphabet’s $100 Billion Stock Swoon Shows AI Stakes Are Rising

    The stakes in the race for generative AI are rising.

    | Updated on: Feb 10 2023, 06:39 IST
    Google BEST apps of 2022 announced! Check out Tablets, Chromebooks, Wear
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    1/5 Google says that 2022 marked the post-pandemic era for many across the world – and in India too, people once again opened themselves to the possibilities and experiences of the outside world while continuing to depend on digital solutions for support across many of their needs. (Unsplash)
    2/5 The winner of the Best Chromebooks app is BandLab – Music Making Studio, which is a free music recording and leading social music creation platform with more than 50 million users worldwide. (Unsplash)
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    3/5 BandLab is an app that lets users share music, no matter their skill level or background. The app also has a multi-track Studio, a music maker that lets you record, edit, and remix your music. (Google Play Store)
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    4/5 The best Tablets apps is the ‘Pocket: Save. Read. Grow.’ This app will help to capture the content that comes at you all day long, and curate your own space filled with only the topics you care about. You can save the latest stories, articles, news, sports, and videos from any device, and any publisher or app. (Google Play Store)
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    5/5 Google announced the best for Wear apps is the "Todoist: to-do list & planner." The app is a delightfully simple yet powerful task planner. It will even provide a work-life balance kind of service. (Google Play Store)
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    Google parent Alphabet’s shares tumbled 7.7% on Wednesday after concerns surfaced about the competency of Bard, the ChatGPT rival it unveiled on Feb. 6. (AFP)

    The stakes in the race for generative AI are rising.

    The fervor in the stock market bubbling around artificial intelligence spread this week to Microsoft Corp. and Alphabet Inc., which despite investing heavily in the technology had so far been ignored by traders in favor of smaller, more speculative companies.

    Google parent Alphabet's shares tumbled 7.7% on Wednesday after concerns surfaced about the competency of Bard, the ChatGPT rival it unveiled on Feb. 6. The selloff continued on Thursday with a drop of as much as 5.1%, on track for the worst two-day decline since March 2020. The rout has erased about $170 billion in market value.

    The fact that the selloff was far bigger than the 2.8% drop the day after Alphabet's earnings missed estimates shows how important success in the AI arms race has become for investors.

    “For a stock like Google to get knocked down this much, it just shows you that people aren't even looking at the fundamentals,” said Matt Maley, chief market strategist at Miller Tabak + Co.

    The drama around Alphabet was in stark contrast to Microsoft, whose presentations about how it's incorporating OpenAI's popular ChatGPT technology into products like its Bing search engine helped send its stock up 4.2% on Tuesday. Analysts' enthusiasm was muted, with Morgan Stanley saying it can be difficult and expensive to get consumers to change their behavior when it comes to search and browsing.

    Until this week, the speculation surrounding artificial intelligence in the US had been mostly limited to Nvidia Corp., which dominates the market for chips used for complex computing required for artificial intelligence programs, along with more obscure software makers with AI in their names. Inc., for example, has more than doubled this year. Microsoft and Alphabet, meanwhile, are lagging behind the Nasdaq 100 Index.

    Chinese tech companies like Baidu Inc., Alibaba Group Holding Ltd. and NetEase Inc. have also announced plans to expand AI capabilities, fueling gains in their shares.

    Despite Alphabet's stumble, it's far too early in the race for generative AI and the development of business models around it to declare a winner, according to Bill Stone, chief investment officer at Glenview Trust Co.

    “There is obviously a worry that Alphabet will lose its edge in search, just because it is so dominant there and there's a lot of money in search, but it still has the tools to compete,” he said. “We own both Microsoft and Alphabet and think both have the ability to be leaders in the field.”

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    First Published Date: 10 Feb, 06:37 IST
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