Overnight, investors slashed Google's market capitalization by 7.5%, largely due to speculation that artificial intelligence applications on mobile devices might soon supplant traditional search engines. This competition to lead this field could significantly determine the future stock market victors and vanquished.
The $150 billion sell-off in Google’s search business
Alphabet
emerged due to remarks made by
Apple (
NYSE: AAPL
)
Executive Eddy Cue stated that Apple’s Safari browser might undergo changes.
Google
(
NASDAQ: GOOGL
)
using the default search engine for AI-based conversational agents from companies like
ChatGPT
.
Via its search engine's dominance, Google made the market for keyword searches a winner-takes-all monopoly, which catapulted the Stanford University-born company to a US$2 trillion giant as it beat competition from the likes of Yahoo Search and
Microsoft
's Bing.
Looking ahead, there's no doubt that consumers will interact with AI assistants on smartphones on a daily basis within 12-18 months and this will be a similar revolution to keyword searches and their dominance of online advertising.
The big question is whether this becomes a winner-takes-all market like search, or one carved up by multiple tech giants featuring five or so alternative chatbots on smartphones, which all seek to suck consumers into sticky ecosystems of apps, messaging, music, news, transport, and social media services.
Is Meta the successor to Google?
The previous week, Facebook, Instagram, and WhatsApp owner
Meta
(
NASDAQ: META
)
It launched its Meta AI assistant application, and it’s well-known that CEO Mark Zuckerberg is engaged in a strong competition with Apple due to his belief that the company uses unfair competitive tactics within the app market.
Around the same time, Zuckerberg also fielded a question from Wall Street analyst Youseff Squall as to whether he saw AI assistants a a winner-takes-all market similar to search.
Zuckerberg said he thought it unlikely people would use multiple AI assistants to perform the same tasks and that personalisation (likely through the data Meta amasses on users) is a potential competitive advantage.
Meta is at the forefront of the AI wearable market with products like its Ray-Ban glasses, and over 1 billion individuals worldwide use eyeglasses.
Upon closer inspection, it’s clear that Meta’s rush to release the app independently (this might be their first organic development project since Facebook) as quickly as they can suggests they view it as potentially being a winner-take-all scenario. Their significant user data for personalized experiences may provide them with a competitive edge in this race.
The substantial ongoing increase in Meta’s user base, reaching an impressive scale with 3.43 billion daily active users across all their applications, offers a significant edge when directing the company’s new Meta AI application towards this vast audience.
If Meta’s AI application gets very close to dominating a win-lose marketplace, it could become akin to today’s Google, establishing nearly monopolistic control over how consumers engage with the vast array of online services, advertisements, and one another through the internet.
Nevertheless, there’s no question that ChatGPT has an early lead, and the competition will be intense. The development in this field over the coming 12 months will likely capture significant attention from both the market and the media.
Reshaping the Future of Journalism
Another point to note is New York-headquartered global media and publishing giant
News Corp
(
NYSE: NWS
)
inked an agreement last year with OpenAI, the owner of ChatGPT, to license both its current and archived publication material from sources like
The Wall Street Journal, Herald Sun, Barron's, The Australian, and Sunday Times.
This indicates that ChatGPT users will get their news directly through the application instead of visiting the publishers’ websites. This move adds fuel to the ongoing battle between conventional media outlets striving for prominence in both news dissemination and online viewership.
Unfortunately, we can't delve into all the ramifications of this agreement here. However, considering various media entities possess distinct objectives and ideological inclinations, it's plausible these AI applications might begin delivering data that mirrors varying prejudices.
At the terrific
Macquarie Australia Conference
on Tuesday,
Nine Entertainment's (
ASX: NEC
)
Chief Executive Matt Stanton informed investors that the domestic publishing leader might explore similar agreements. He added that artificial intelligence applications would likely engage in several partnerships to mitigate various biases within their republished news content.
Stanton commented, "We have the option to follow their lead. Keep in mind that News took this step as they operate globally, whereas we do not." He continued, "It seems more like a matter of timing to reach this point. We’ve initiated extremely preliminary discussions with certain unspecified AI teams, and I believe this could present a valuable opportunity for our company, potentially leading to significant and beneficial business outcomes for us."
It becomes clear that the future direction of journalism, online searches, and how people engage with the web is poised to change at an accelerated pace, increasing the importance due to possible outcomes where one party could dominate entirely.
Investors should find it noteworthy that Google is currently trading at only 13.6 times its annualized earnings per share of US$11.24, based on the reduced price of US$152.80 from Wednesday. Additionally, the company has announced a substantial US$70 billion stock repurchase programme.
The unmatched negativity surrounding Alphabet’s prospects in an AI-driven landscape indicates that the fluctuation in stock markets between the Magnificent Seven tech giants and conventional media entities will continue to escalate.
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