Google’s own artificial intelligence is eating into the money it makes from ads on traditional search. After the company said so, its parent Alphabet lost more than $500 billion in market value on Thursday, as investors questioned whether it can keep its established business growing while spending heavily on AI.
Alphabet’s chief business officer, Philipp Schindler, said Google’s “AI Mode” was affecting ad revenue from traditional search. In AI Mode, users get answers to their questions through a conversation, which means less money from the ads shown beside ordinary search results.
Schindler was nonetheless upbeat about Google’s progress with AI-driven search. “I’m very pleased with the trajectory of our progress,” he said.
The rise of AI has challenged Google’s long dominance in answering people’s questions. Millions of people now use AI programs such as ChatGPT and Claude.
Kim Scott, a former head of Google’s advertising business, told the BBC’s Today programme that Google wants to launch its own AI technology before anyone else takes its business away, even if that hurts its existing business.
“Google would rather damage its own business with a new technology than let somebody else take its business away,” Scott said.
Scott said Google was founded on a focus on long-term technology investment. Such investment can hurt a company in the short term but pay off over the long term.
“I think they’re making a long-term bet on AI,” Scott said.
Revenue up, but short of expectations
In its financial report published on Wednesday, Alphabet said its total revenue for July to September rose 25 per cent from the same period last year, to $127.6 billion.
That was still short of analysts’ forecasts. Advertising revenue in particular came in below expectations, which worried investors.
After the report, Alphabet’s shares fell more than 12 per cent on Thursday to a six-month low. The company’s market value, $3.97 trillion the day before, had fallen to $3.46 trillion by the close on Thursday.
Tracy Wu, principal analyst at the research firm Forrester, said the disappointing results from Google’s search business showed how hard it is to keep an established business strong while finding the money for huge AI investment.
Concern over Amazon’s heavy spending
Microsoft and Amazon also reported their results this week. Both said they would keep spending heavily in the AI race, but investors are worried about what that spending means for growth in their established businesses.
Amazon’s shares fell 6 per cent after trading on Thursday.
Amazon said its quarterly revenue rose 11 per cent from a year earlier to $201 billion. But its cash flow over the period was negative $42 billion, meaning it spent more than it earned. That spending rose sixfold in three months.
Amazon’s chief executive, Andy Jassy, said the company sees two businesses that could one day earn Amazon a trillion dollars: its cloud service and its retail business.
In a call with financial analysts, Jassy also spoke of the prospects for Amazon’s own computer chips, which it makes and sells, and for Bedrock, its AI developer platform. Through Bedrock, users pay for access to large AI models and other technology.
“What we have learned over more than 20 years is that there is no single technology that rules the world,” Jassy said.
In his view, the idea that whichever technology leads at the start is the one everyone will use in the future is wrong.
Asked repeatedly about the company’s heavy spending, Jassy acknowledged it would have been easier to spread the investment over the next 25 years, but said present conditions do not allow that.
“We can fund this plan,” he said. “I believe it will permanently change Amazon’s size, revenue and free cash flow.”
Microsoft’s results also raise the question of AI’s real value
Wall Street reacted more mildly to Microsoft’s results. Its shares fell by less than 1 per cent on Thursday.
Microsoft, one of OpenAI’s biggest investors, spent about $5 billion less on AI than before. Earlier this week the company also announced plans to cut several thousand jobs, which will reduce its costs further.
Microsoft’s revenue for the last quarter rose 19 per cent from a year earlier to $92.3 billion. Revenue from its important cloud business rose 30 per cent to $63 billion.
Chief executive Satya Nadella said use of Copilot, Microsoft’s AI chatbot and assistant tool, had grown. The number of tasks completed automatically has nearly doubled since July, and daily users are up 500 per cent from last year.
Lower costs and rising revenue would normally draw a positive response from investors. But Forrester’s Tracy Wu said Wall Street is now taking a long view of which companies will actually reap the benefits of the huge promises made for AI.
“Microsoft’s results show that demand for AI among companies is still strong,” Wu said. “But they also raise a bigger question for the technology sector: where will the real value of AI end up?”
বাংলায় মূল প্রতিবেদন পড়ুন · Read the original Bengali report