HomeArtificial IntelligenceArtificial Intelligence NewsDevelopment of AI will cost both Microsoft and Google

Development of AI will cost both Microsoft and Google

Google’s rivals have always been a click away. In an AI-driven world, though, even Microsoft might find the cost of providing those clicks to be extremely high—particularly given that even immensely lucrative tech firms must carefully monitor their bottom lines.

Microsoft announced on Tuesday that it is accelerating the integration of OpenAI’s artificial intelligence tools into its products and services. This includes OpenAI’s ChatGPT chatbot, which was released a little over a month ago and has rapidly gained popularity as users flocked to the tool. Much to the dismay of educators everywhere, ChatGPT can also write lengthy essays and even poems in addition to spitting out conversational answers to user queries.

Microsoft’s interest in utilizing the technology is not surprising given that it has already invested $1 billion in OpenAI and is apparently willing to spend even more in the firm. However, the discovery was yet another unhappy development for Google, whose main search business may be endangered by the question-answering capabilities of tools like ChatGPT.

The debut of ChatGPT on November 30 reportedly caused Google management to issue an internal “code red,”. Although Microsoft’s Bing search engine only makes up a small portion of the global market, it is Google’s biggest competitor in the web search business.

The stock of Alphabet, the company that owns Google, lost around 1% on Tuesday, and it has lost close to 10% since ChatGPT launched, which is the poorest performance among major technology companies and triple the Nasdaq’s percentage decline during that time. Tuesday saw a slight increase in Microsoft shares, but a sharp increase in Nvidia shares, which produce the AI chips that both firms utilize in their data centers.

In a recent study, UBS analysts stated that they believed ChatGPT’s skill and consumer traction posed a short-term danger to Alphabet’s multiple and an opportunity for Microsoft and Nvidia.

ChatGPT does not appear to be a passing fad. According to data, the number of daily visitors to the tool’s main page recently topped 20 million, more than doubling the number of daily hits the site was receiving two weeks after its debut.

However, in terms of the effect on Google, investors might be jumping the gun. Not all web searches are created equally, particularly those that may result in revenue from linking to advertisements. Natural language questions and responses are ChatGPT’s area of expertise.

However, it is challenging to identify the source of some of those answers’ information, which is not always accurate. An ocean separates a general information search question from a monetizable one, Bernstein analyst Mark Shmulik stated in a recent research, adding that ChatGPT’s failings on the latter were “glaringly evident.”

Google can also rely on the widespread, deeply established behavior of the population. According to StatCounter, the firm has been the engine behind more than 90% of all global internet searches since at least 2009. Even the mid-year launch of Bing by Microsoft had little effect on Google’s market share.

Given the required computer power, integrating AI tools like ChatGPT could ultimately be expensive for both businesses. According to Brian Nowak of Morgan Stanley, Google’s cost for a conventional search query is around seven times lower than ChatGPT’s cost per inquiry.

Mr. Nowak anticipates that the multiple may drop to four times if OpenAI is able to access the lowest priced tiers of Microsoft’s Azure cloud service. However, that represents a significant gap that reflects potential costs Microsoft may incur as it integrates ChatGPT and other OpenAI tools further into its products.

Such pressure wouldn’t be appropriate. Investors are paying more attention to the profitability of both companies as this year’s revenue growth is anticipated to be significantly slower. The operating margins for Alphabet are predicted to be 27% this year, which is a decrease from 2022 but still around 5 percentage points higher than the average for the three years before to the pandemic. Microsoft, meanwhile, is anticipated to maintain its own margins above the 40% line for a third straight year, accomplishment not broken since 1999.

That may help to explain why Microsoft ultimately decided to reduce its workforce in line with other major tech companies. On Wednesday morning, the corporation announced its intention to let go of 10,000 workers, or less than 5% of its staff. A similar action by Google’s parent company is anticipated soon.

Even ChatGPT wouldn’t be able to provide an answer to the problem of how to spend more when investors want to see less money leaving the company.

Source link

Most Popular