Shares of Alphabet Inc experienced a decline of up to 4% on Monday in response to a report that Samsung Electronics of South Korea is contemplating replacing Google with Microsoft’s Bing as the default search engine on its devices.
The report, which was published by the New York Times over the weekend, highlights the increasing competition that Google’s search engine business, which generates $162 billion annually, faces from Bing, a smaller player that has gained more prominence lately thanks to the incorporation of artificial intelligence technology from ChatGPT.
According to the report, citing internal messages, Google responded to the threat with “panic” since the company generates around $3 billion in annual revenue from the Samsung contract.
Another $20 billion is tied to a similar Apple contract that will be up for renewal this year, the report added.
When asked by Reuters for comment, Google did not respond about its partnership with Samsung but mentioned that it is working on incorporating new AI-powered capabilities into Search. Samsung, on the other hand, did not respond to the request for comment.
For decades, Google has held a dominating share of over 80% in the search market. However, there are concerns on Wall Street that the company may be lagging behind Microsoft in a rapidly-evolving AI competition.
On Feb. 8, Alphabet, the parent company of Google, suffered a loss of $100 billion in market value after its new chatbot, Bard, provided incorrect information in a promotional video and an event failed to impress investors.
On Monday, Alphabet’s stock plummeted to $104.90, resulting in the company’s market capitalization being reduced by almost $50 billion. Meanwhile, Microsoft outperformed the overall market, experiencing a 1% increase.
According to James Cordwell, an analyst at Atlantic Equities, investors are concerned that Google has become a complacent leader in the search market, and recent events have highlighted this issue. Cordwell also mentioned that the costs associated with making Google Search more competitive with AI-powered Bing could be a source of concern. On Monday, Alphabet shares closed 2.7% lower at $105.9.
