Google faces a new threat from OpenAI

For years, companies have developed search engines after search engines, vowing their products would topple Google's dominance.

With little success.

Google, owned by Alphabet (GOOGL) , remains the dominant player in search with a 91% share. One reason for its dominance: It's embedded in the software of just about all smartphones.

But a new player is starting to develop its own search engine: OpenAI.

TOKYO, JAPAN - JUNE 12: OpenAI Chief Executive Officer Sam Altman speaks during an event at Keio University on June 12, 2023. OpenAI is targeting Google's search business.
Tomohiro Ohsumi/Getty Images

OpenAI takes aim at Google's search dominance

The AI-darling behind ChatGPT announced Thursday that it's testing SearchGPT, which is described as "a temporary prototype."

OpenAI, the Silicon Valley startup worth $80 billion or more, has been one of the leaders in artificial intelligence development. It is best known for its ChatGPT application, the chatbot and virtual assistant that has more than 100 million users.

Some investors see the idea as having a shot.

Alphabet shares slid 3.1% to $167.28 on July 25, its lowest close since May 3.

The shares are down about 12.8% from Alphabet's 52-week high of $191.75, reached on July 10. They're also are down 8.2% in July.

OpenAI's news also gutted a rebound in big tech stocks.

Maybe a giant in search

What OpenAI hopes to do with SearchGPT is design and create new search features that will "combine the strength of our AI models with information from the web to give you fast and timely answers with clear and relevant sources."

The prototype will provide data Open AI will use to "integrate the best of these features directly into ChatGPT in the future."

The first step, the company said, is to launch the application "to a small group of users and publishers to get feedback."

Among companies involved are The Atlantic and News Corp. (NWSA) , the parent of The Wall Street Journal.

Individuals can sign up to a waitlist of users who will test the tool.

There are others working on similar applications such as Perplexity. Perplexity is backed by Amazon.com founder Jeff Bezos and Nvidia (NVDA) .

Big tech stocks give up a rally

Alphabet's slump helped stall a relief rally for the Nasdaq Composite Index, which saw a 202-point rally sink to a 161-point loss to 17,181.72.

More AI Stocks:

The Nasdaq-100 was off 1.1% to 18,830.58.

The Standard & Poor's 500 was off 0.5% to 5,399.22. The Dow Jones industrials were up 0.2% to 39,935. But the index had risen to as high as 40,438 early in the session.

Microsoft (MSFT) shares fell 2.5% to $418.40. Microsoft would be a competitor with its Bing search engine. However, Microsoft owns 49% of OpenAi's equity and has invested $13.3 billion in the organization.

In all, six of the Mag 7 stocks, including Alphabet and Microsoft, dropped on Thursday.

Apple (AAPL) , down 0.5% to 217.49
Amazon.com (AMZN) , down 0.54% to $179.85
Facebook parent Meta Platforms (META) , down 1.7% to $453.41.
Nvidia, down 1.7% to 112.28.

Electric vehicle maker Tesla (TSLA) closed up 2% to $220.25.

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