Alphabet shares are on pace for their worst day in over two months following a report indicating the Google parent company is in danger of losing a key multibillion-dollar search engine contract to Microsoft, as the artificial intelligence rivalry between the two technology giants rages on.
Samsung is mulling a switch from Google to Microsoft’s Bing as the default search engine on its smartphones and tablets, the New York Times reported Sunday, putting a contract worth a reported $3 billion per year in jeopardy.
Though that represents just over 1% of Alphabet’s roughly $280 billion in annual revenue, it’s the latest indication that Google’s search engine dominance may be fading, with the Times reporting there was “panic” among Alphabet employees over the Samsung contract.
Alphabet shares slid as much as 4.1% in early trading Monday, shedding $57 billion in market capitalization, while Microsoft shares climbed 1.6%.
That continues a months-long trend of Microsoft’s stock outperforming Alphabet’s, as Microsoft shares are up 21% since the November launch of ChatGPT, OpenAI’s viral chatbot incorporated into Bing; Alphabet shares are up 10% during the same period.
Microsoft has an “early lead” in the artificial intelligence space as it exhibits a “renewed vigor” in the search market, Goldman Sachs analysts led by Kash Rangan wrote in a note to clients last month.
Microsoft announced in January it made a multibillion-dollar investment in OpenAI, reportedly infusing $10 billion into the budding generative AI company and taking what will be a 49% stake in the firm. Just three weeks later, Microsoft rolled out its integration of ChatGPT into Bing and its Edge web browser. Bard, Google’s answer to ChatGPT, has received more lukewarm feedback, with Alphabet shares tanking 7% on February 8 after the chatbot provided inaccurate information during a demo.
Microsoft is the “clear early leader” in the generative AI space and has “potential to achieve escape velocity” and separate itself from competitors, JPMorgan analyst Mark Murphy wrote earlier this month.
20%. That’s roughly the proportion of the roughly 4.4 billion smartphone users worldwide that use a Samsung device, according to Counterpoint Research and GSMA Intelligence data.
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By Derek Saul, Forbes Staff