- Microsoft's improved ChatGPT-enabled search engine poses a significant threat to Google's dominance in the search market.
- Regulatory cases against Alphabet may further benefit Microsoft's Bing-Chat product and lead to a shift in market share in my view.
- If Google loses the case and Bing Chat gains widespread acceptance, Alphabet may experience a major drop in search engine income.
The article discusses the author's belief that Google's search engine, which is the primary revenue driver for Alphabet (NASDAQ: GOOG, GOOGL), is facing the potential for a significant drop in income due to an improved search engine from Microsoft (NASDAQ: MSFT) that incorporates ChatGPT technology. The author outlines several key points:
- Antitrust Cases: The article highlights ongoing antitrust cases against Alphabet, including a lawsuit from the U.S. Department of Justice. The case alleges that Google has maintained its dominance in the search market through anticompetitive practices.
- Parallel with Microsoft's Antitrust Case: The author draws parallels between the current antitrust case against Alphabet and the case against Microsoft in 2001 when the company was accused of using its Windows operating system to suppress competition, particularly Netscape Navigator. The author notes that Google uses its Android operating system and financial resources to ensure Google Search is the default search engine, similar to the situation Microsoft faced.
- Consumer Confidence and EPS Growth: The article suggests that U.S. consumer confidence has declined, which could affect the earnings-per-share (EPS) growth Wall Street expects in FY2024. The author expresses skepticism about the consensus for double-digit EPS growth.
- Equity Risk Premium: The equity risk premium is described as low, which may not justify the current bullish sentiment in the stock market.
- Microsoft's Bing Chat: Microsoft's investment in OpenAI's ChatGPT technology is discussed, particularly its integration into the Bing search engine. The article highlights Bing Chat as a potential game-changer in the search engine market, offering a more interactive and conversational search experience.
- Potential Impact: The author suggests that if Bing Chat gains wider acceptance, it could challenge Google's dominance in the search market, potentially leading to a significant loss of search engine income for Alphabet. The article notes that Google Search accounts for a substantial portion of Alphabet's revenue.
- Regulatory Threats: In addition to the antitrust cases, the author points out regulatory investigations in Europe and the potential for regulatory forces to compel Google to open up its software and stop setting Google Search as the default.
- Investment Decision: The author mentions their investment decisions, including reducing their holdings in Alphabet (GOOG) and increasing holdings in Microsoft (MSFT).
In summary, the article suggests that Google's search engine may face challenges from both antitrust cases and the emergence of Microsoft's Bing Chat search engine, which incorporates AI technology and offers a more user-friendly experience. The author is cautious about Google's future and has adjusted their investment portfolio accordingly.
