Bard fail costs Google $100 billion in market value

Alphabet Inc. suffered a major blow on Wednesday, losing $100 billion in market value as the company's new chatbot failed to impress investors at a promotional event.

The search giant's new chatbot, Bard, also made headlines for sharing inaccurate information in a promotional video, fueling worries that Alphabet is falling behind rival Microsoft Corp.

Alphabet shares declined as much as 9 per cent during regular trading and were nearly three times the 50-day moving average. However, the stock pared losses after hours and was roughly flat.

The error in Bard's advertisement was first pointed out by Reuters and highlights the importance of a rigorous testing process. The chatbot was introduced on Monday with the promise of simplifying complex topics, but instead delivered an incorrect answer about which satellite first took pictures of a planet outside of the Earth's solar system.

Google's live-streamed presentation on Wednesday failed to include any details about how and when Bard would be integrated into the company's core search function. Meanwhile, Microsoft held an event showcasing its newly released Bing search with ChatGPT functions integrated.

"While Google has been a leader in AI innovation over the last several years, they seemed to have fallen asleep on implementing this technology into their search product," said Gil Luria, senior software analyst at D.A. Davidson.

The rise of OpenAI, a startup backed by Microsoft with $10 billion, has put Google on the defensive. OpenAI's software, introduced in November, has generated a lot of buzz in Silicon Valley for its accurate and well-written answers to simple prompts.

Microsoft shares rose around 3 per cent on Wednesday, while Alphabet posted a GIF video of Bard in action via Twitter. However, the search and advertising giant is facing challenges as advertisers cut spending, and it is reportedly bringing in founders Sergey Brin and Larry Page to accelerate its efforts.

The new ChatGPT software has created excitement in the technology sector after recent job cuts and executive pledges to scale back on so-called moonshot projects. AI has become a major focus for tech executives, who have mentioned it as much as six times more often on recent earnings calls compared to previous quarters.

While AI-driven search holds the promise of delivering results in plain language, making browsing faster and more efficient, it remains unclear what impact this will have on targeted advertising, which is the backbone of search engines like Google. Chatbot AI systems also carry risks, as they can be biased, sexualize images, or plagiarize, as seen with past examples from Microsoft and CNET.

At the time of writing, the Bard ad had been viewed over a million times on Twitter. King Lip, chief strategist at Baker Avenue Wealth Management, which owns shares of Alphabet and Microsoft, believes that concerns about Alphabet may be overblown, but adds that people are starting to question if Microsoft will be a formidable competitor against Google's core business.