Will OpenAI Affect Google Stock?

OpenAI, the startup that became famous for the creation of ChatGPT, has been one of the most talked-about companies in the world over the past couple of years. Though the company remains private, investors have carefully watched to see what new products and technologies it will release.

Recently, there has been a great deal of buzz around OpenAI’s long-term plan to launch its own AI-powered search engine.

With the company still soaring on the success of GPT, it’s worth considering whether or not OpenAI has the potential to disrupt Google and become the new king of online search.

OpenAI’s Foray Into Online Search

OpenAI’s strategy for developing a search engine is so far fairly murky. The company appears to have set up a web page that will eventually be used to host the search engine, and it has been poaching employees from Google to deepen its talent pool. However, exact details of the search chatbot, its features and its workings remain elusive.

Fortunately, it’s already possible to see some of OpenAI’s technology at work in a live search engine. This is because Microsoft’s Bing engine leverages the company’s generative AI to power its chatbot.

So far, the results of adding AI functionality to a search engine competing with Google have been positive. Only weeks after adding the chatbot, Bing soared to 100 million daily active users and reported that about a third of those users were using the new AI features.

Though it’s impossible to say whether or not OpenAI’s own search engine would enjoy similar success to Bing, it’s likely that the company would be able to attract users to give it a try.

The ChatGPT website gets about 1.5 billion visits per month, and many people use tools built around the chatbot in their daily work routines.

Though OpenAI is far from being as well-known as Google, the company’s high profile and visibility will most likely help it rapidly bring in an initial user base when it finally decides to launch its search engine.

Google Remains Firmly Dominant

Though the prospect of new AI-powered search engines could subject Google to a bit more competitive pressure than it’s used to, we still have to keep in mind just how dominant the online search leader really is.

Microsoft announced the integration of generative AI into Bing in February of 2023. More than a year later, Google still accounts for nearly 91 percent of all global search traffic.

It’s also interesting to remember that Google’s lead in AI is what drove Microsoft to invest in OpenAI in the first place.

According to a report filed by Microsoft to EU regulators, Google enjoys an entrenched competitive edge in the field due to its vertical integration and massive stores of data.

Google is one of the few companies with the resources to make its own proprietary AI chips. In combination with a nearly endless supply of data to train its AI models with, this gives Google a moat that up-and-coming competitors like OpenAI will find extremely difficult to breach.

This goes to another of Google’s advantages, which is its enormous resources. Alphabet, the search engine’s parent company, boasts more than $110 billion in cash on hand. For reference, OpenAI’s total valuation is just $80 billion.

Between its natural competitive advantage and vastly larger financial resources, Google is likely in an excellent position to defend its spot at the top of the search engine industry.

Google even enjoys an extremely gifted AI talent pool, giving it the human resources to fully leverage its other advantages. The core of this AI know-how dates back to the 2014 acquisition of AI startup DeepMind. This acquisition gave Google a team of leading minds in the early AI field and has been a contributing factor to the company’s success in building more advanced artificial intelligence tools ever since.

Will Open AI Affect Google Stock?

It’s unlikely that Open AI will have a material effect on Google stock over the long-term given how much distribution and data Google enjoys.

OpenAI will have a difficult time disrupting the internet giant. Google is literally so dominant in online search that “Googling” has become interchangeable with the concept of searching for something online. That kind of brand power would be difficult to break through, even without all of Google’s other competitive advantages.

Other traditional search engines have had a notoriously difficult time breaking this iron grip on the online search industry. Bing, the second-largest search engine, doesn’t even account for 5% of the market.

Further afield, niche search engines like Brave, DuckDuckGo, Ecosia and Mojeek offer users benefits like enhanced privacy and superior environmental sustainability.

Though these alternatives maintain large enough user bases to keep themselves going, none of them has put a serious dent in Google’s market share. As Bing proved, OpenAI’s technology may provide it with a boost when compared to more traditional search engine alternatives. However, the uptick in usage appears to have had limited impact on Google.

It’s also important to keep in mind that OpenAI still appears to be quite a way from launching its search engine. Despite rumors that the company could announce the launch as early as this week, OpenAI has denied any such plans.

It’s not clear what the timeline for an OpenAI search engine could be, but there don’t appear to be any immediate plans to make the tool public. This latter fact could put OpenAI at a disadvantage to at least one other would-be Google competitor, Perplexity.

This search engine, founded by a former OpenAI and Google employee, uses large language model AI to respond to user queries. Unlike OpenAI, however, Perplexity’s search engine is already up and running. In fact, the product is popular enough that NVIDIA CEO Jensen Huang is known to use it as his daily search chatbot of choice.

On the whole, neither OpenAI, Perplexity nor any other search engine appears to be in a position to unseat Google. The company’s early lead in AI, combined with unparalleled resources, an absolutely dominant position in online search and a strong team of AI talent will likely keep Google at the forefront of its industry for the foreseeable future.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.