Alphabet shares fall 7% following Google’s A.I. event

Shares of Google’s parent Alphabet tumbled more than 7% on Wednesday after the company held an event that promoted its new artificial intelligence chatbot called Bard, one day after competitor Microsoft held its own event to show off new AI technologies in its competing search engine, Bing.

Google officially announced Bard on Monday, confirming CNBC’s prior reporting, and the company said it will begin rolling out the technology in the coming weeks.

During the event Wednesday, which was livestreamed from Paris, Google executives discussed some of Bard’s capabilities. The presentation showed how Bard can be used to display the pros and cons of buying an electric car, for example, or to plan a trip in Northern California.

Bard is powered by the company’s large language model LaMDA, or Language Model for Dialogue Applications. Google will open up the conversation technology to “trusted testers” ahead of making it more widely available to the public, the company said in a blog post Monday.

The event also showed AI improvements to a number of other Google products, including Maps and Google Lens, which lets people search for images from their phone’s camera.

Shares of Alphabet slid during the event, suggesting that investors were hoping for more in light of growing competition from Microsoft.

Google’s event took place just one day after Microsoft hosted its own AI event at its headquarters in Redmond, Washington. Microsoft’s event centered around new AI-powered updates to the company’s Bing search engine and Edge browser. Bing, which is a distant second to Google in search, will now allow users get more conversational responses to questions. 

The Microsoft product updates were built on technology from ChatGPT-maker OpenAI, in which Microsoft has invested billions.

ChatGPT is AI software that generates text based on complex written prompts. The web-based tool went viral after its debut in November, prompting analysts and Google employees to ask whether the company was falling behind in AI, an area which has been a core focus for Google for several years. In response to ChatGPT’s popularity, Google declared an internal “code red” to accelerate development of Bard and other AI products, and the company’s co-founders, Larry Page and Sergey Brin, reportedly got involved again, years after stepping down from day-to-day work at the company.

Though Microsoft’s latest AI investments increase the pressure on Google search, some analysts say it will take time for Microsoft to see any significant gains.

“Search improvements will act as a tailwind to [advertising revenue long term], but it will take time to bring users back to Bing and they will need a crowbar to pry away advertisers from Google,” Jefferies’ analyst Brent Thill wrote in a Tuesday note. “We view these updates as the tip of the iceberg for MSFT’s AI capabilities, with the largest opportunity in enterprise use cases.”

An analyst at UBS said that if Microsoft hopes to overtake Google, it has a “mountain to climb.”

— CNBC’s Jennifer Elias contributed to this report.