- Microsoft's Bing update and ChatGPT technology gives it an edge over Google in the AI search wars, BofA said.
- ChatGPT's popularity among consumers creates uncertainties for Google.
Microsoft emerged as the winner this week over Google as both companies hosted presentations on their respective AI search technologies, with the latter disappointing with a mistake in a video. Still, Google has several key long-term advantages, according to Bank of America.
Microsoft highlighted a strong strategy and demos in its presentation, but Google's "felt reactive with little new news, and even included an inaccurate AI chatbot response," strategists wrote in a Thursday note. "We think Google's big reveal is still to come, which we would expect in weeks and not months."
Since OpenAI launched ChatGPT in November, the language bot has gone viral, and Microsoft announced a $10 billion investment in the company last month.
The tech giant this week debuted a revamped version of its search engine, Bing, now powered by ChatGPT and GPT-3.5, according to OpenAI CEO Sam Altman.
That popularity of ChatGPT among consumers — it's garnered 1 billion cumulative web hits since November — as well as the revitalization of Bing poses new uncertainties for Google, BofA said.
It's possible that Bing's new technology helps it gain market share from Google, which has long been the dominant search engine, the strategists said. There's also the possibility for renewed investments in Bing, higher industry search costs, and a revenue impact from AI-driven search results.
Ultimately, though, Google maintains several key advantages in product and distribution in the long run, the bank said, and strategists reiterated their "Buy" rating for its parent company Alphabet.
"Google has been preparing for AI for years, despite disappointment on Paris press event, we think Google likely has superior AI technology for search, or at least better data to drive better results," the strategists wrote, adding that Google's AI product visibility is poised to increase significantly in the next three months.
Plus, given the strength of the company, Google should be able to offset higher AI search costs if they do come to fruition, according to BofA.
"We have heard investor concerns on both Google's search market share and compute costs, though we are not aware of any search traffic shifts or slowdown in Google search spend since ChatGPT launched a little over two months ago," strategists wrote. "Investors are also thinking more about the value of Google's search distribution deal with Apple, which could now have higher perceived value for both Google and Microsoft."