David Jagielski, The Motley Fool
5 min read
In This Article:
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An Apple executive believes AI search engines could replace what's used today.
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Alphabet's business relies heavily on dominating the search business.
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Its shares have been declining due to the uncertainty around its future.
Artificial intelligence (AI) is rapidly changing the way many companies, across all industries, are doing their day-to-day work. Some of the biggest changes are undoubtedly in technology, where many top companies are investing heavily into AI chatbots and related functions.
As that happens, one company that may be most directly affected by all this is Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), whose Google Search engine is a huge part of its business and generates tens of billions of dollars in ad revenue each quarter. As AI potentially changes how people search for questions and do research, could that spell big trouble for Alphabet's business?
AI is changing the way people search for answers to their queries. Chatbots such as ChatGPT and Perplexity are making it possible for people to have their questions answered without having to open up a browser and go to a search engine like Google.
Apple (NASDAQ: AAPL), which has Google as the default search engine on its Safari browser, is looking to add AI services as possible search options in the future, according to its senior vice president of services, Eddy Cue. He believes that AI-powered searches will be the new norm, replacing conventional search engines.
Shares of Alphabet fell on the news, with investors worrying that this could create a significant risk for the business in the long run. That's because the bulk of the company's ad business comes from its search business. Through the first three months of the year, Alphabet's ad revenue totaled $66.9 billion.
Of that tally, $50.7 billion was from Google Search and other (which includes Gmail, Google Maps, and Google Play), representing a little over three-quarters of that figure. A decline in traffic for search could severely affect how much advertisers are willing to pay Google, which would be a big hit to its top line.
AI is revolutionizing sectors and industries, and Alphabet is by no means immune. At the same time, the company is also investing heavily into AI and its Gemini chatbot. If you use Google Search today, you might see an "AI Overview" section at the top of your results, which summarizes the findings and gives you a response similar to what you might get with other chatbots. It gives users a good mix of both an AI-generated response to their questions and the conventional link-based results some people may prefer.
