Why Alphabet Stock Plunged Today


What happened

Shares of Alphabet (GOOG -7.58%) (GOOGL -7.71%) were taking a dive today after the market reacted poorly to its AI event this morning. The biggest issue seemed to be that its new Bard AI technology, its competitor to OpenAI’s ChatGPT, gave inaccurate information at the presentation.

As of 1:39 p.m. ET, the stock was down 8.2%.

So what

Alphabet’s event this morning came just two days after it announced Bard AI in a blog post on Monday, and just a day after Microsoft unveiled its own ChatGPT-powered version of its Bing search engine, showing the race in AI-powered search is rapidly heating up.

However, it’s starting to look like Alphabet may be rolling out Bard hastily, rushing to respond to the threat from ChatGPT. In the demo, Bard gave a wrong answer when asked a question about the James Webb Space Telescope. 

In an animated GIF shown to the audience, a user asked a question about the telescope and was told, “JWST took the very first pictures of a planet outside of our own solar system.” That’s not true. The first picture of an “exoplanet” was taken by the Very Large Telescope in Chile in 2004.

That, and a presentation that generally underwhelmed, was enough to sink the stock and spark fears that Alphabet could be losing the AI race to Microsoft for now.

It also seems to confirm Alphabet’s argument against releasing its AI tools, as it had said that the technology was too often inaccurate.

Now what

It’s still early, of course, but Google Search, the product that commands a majority of Alphabet’s revenue and profits, is more at risk than ever before, and at least some parts of the search market are likely to transition to generative AI tools like ChatGPT that can give direct answers.

One blunder isn’t enough of a reason alone to sell the stock, but investors should pay close attention to the new technology, especially as Microsoft readies the launch of the new Bing.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Microsoft. The Motley Fool has a disclosure policy.