Is OpenAI’s new product a potential Google killer?

Alphabet (GOOG 0.95%) (GOOGLE 1.01%) has built its massive business around providing users with useful search results. Its search engine is so critical to the success of companies that companies often hire search engine optimization experts to ensure they rank high in search results. Being at the top can have a significant impact on how much traffic and revenue a company generates.

Chatbots and artificial intelligence (AI) can make this much more difficult. For example, if users have to ask a personal assistant or chatbot a question instead of using Google Search, it could impact how much traffic the popular search engine gets.

Tech companies are investing in developing their own chatbots, and perhaps none is more popular than OpenAI’s ChatGPT. And OpenAI recently announced plans to launch another product that poses a more direct threat to Google Search: a real search engine called SearchGPT.

What is SearchGPT?

In July, OpenAI announced it was testing SearchGPT, which uses AI to help people find what they’re looking for, similar to its chatbot ChatGPT. The key difference is that unlike a chatbot, where users are given a single result, they can get multiple results and links to sources.

The company says SearchGPT will “combine the power of our AI models with information from the web to provide fast, timely answers from clear and relevant sources.” It’s currently in test mode and there’s a waiting list to try out the prototype, so there’s no timeline for when it might be fully available to the general public.

Why SearchGPT could be a big problem for Google

Google has faced competition from a number of search engines in the past, but SearchGPT stands out for something different. ChatGPT has proven to be incredibly popular, with over 200 million monthly users. And that popularity could help SearchGPT become a potentially formidable competitor to Google Search.

Google’s problem is compounded by a recent court ruling that Alphabet has an illegal monopoly on its search engine. Alphabet paid companies billions of dollars to become the default search engine on phones and browsers. The court ruled that the company effectively stifled competition by doing so.

It’s unclear what the penalties or consequences will be, but the ruling could significantly impact Google’s Search practices. It could exacerbate a challenge the company could face from SearchGPT in the near future.

Google search engine is still the backbone of Alphabet’s business

It’s hard to overstate the significance of these events. Of the nearly $85 billion in revenue that Alphabet generated in the most recent quarter, which ended in June, about $49 billion came from revenue related to its “Google Search & Other” segment. Including Google Network and YouTube ads, Google’s total ad revenue for the period totaled $64.6 billion.

Alphabet has a lot to lose if it loses its dominant position in search. It generates a significant amount of money from ads related to Google Search. If the latest ruling changes the way the company operates, it could find it easier for a competitor like SearchGPT to make a big dent in the web traffic that goes to Google Search and, ultimately, the revenue Alphabet generates from it.

Should investors avoid Alphabet stock?

Investors should not underestimate the threat that SearchGPT and AI in general pose to Alphabet’s business. The company stands to potentially lose the most from AI because it is so dependent on search queries and questions that people type into its search engine.

Alphabet is working on developing its own Gemini chatbot, and its success could ultimately determine how well Alphabet can fend off this latest threat. However, it’s too early to tell at this stage what impact SearchGPT will have.

The risk for Alphabet is that, given its large exposure to search-related revenue, a decline in that revenue could significantly impact the company’s valuation, which currently stands at around $2 trillion.

Before I consider investing in Alphabet’s business, I would wait to see not only how successful and popular SearchGPT is, but also what effect the recent antitrust ruling has on Google Search. Until there is clarity on these two issues, it would be wise for investors to sit on the sidelines for now. Investing in a tech stock while these two issues are still unclear could expose investors to too much risk and uncertainty.

Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has a position in and recommends Alphabet. The Motley Fool has a disclosure policy.