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Microsoft (MSFT) on Tuesday announced it is integrating the technology behind the viral chatbot ChatGPT into its Bing search engine and Edge web browser. Microsoft stock jumped amid hopes the artificial intelligence tool can help Bing chip away at Google’s dominance in the internet search market.
The announcement is part of Microsoft’s plans for artificial intelligence following its multibillion-dollar investment in OpenAI. Microsoft and other AI stocks have been surging lately on optimism for the technology.
Microsoft Chief Executive Satya Nadella said the Bing upgrade will enable a new kind of search. With it, people can ask questions in the search engine in natural language and it will generate direct answers. Also, Bing’s application of the AI technology will have access to the latest information like news stories and train schedules, something ChatGPT doesn’t have, the Wall Street Journal reported.
“AI will fundamentally change every software category, starting with the largest category of all — search,” Nadella said in a blog post. “Today, we’re launching Bing and Edge powered by AI copilot and chat, to help people get more from search and the web.”
On Jan. 23, Microsoft announced a new investment, reportedly worth $10 billion, in artificial intelligence startup OpenAI. OpenAI is the organization behind text generator ChatGPT and image generator Dall-E. Microsoft previously invested in OpenAI in 2019 and 2021.
Microsoft is providing its Azure cloud-computing infrastructure for OpenAI. It also is adding OpenAI models to its consumer and enterprise software products.
On the stock market today, Microsoft stock rose 4.2% to close at 267.56. Excitement over the capabilities of generative AI technology, such as ChatGPT, has boosted AI stocks generally.
Wedbush Securities analyst Daniel Ives called Microsoft’s investments in OpenAI “a game changer” for the software giant. In a note to clients, he said it kicked off an “AI arms race” among tech companies.
“With Google aggressively looking to defend its turf on the search front with its own beta AI tool named Bard, Microsoft is aggressively going after the AI opportunity on both the cloud front as well as the search frontier,” Ives said.
He added, “We view this as the first shot across the bow in this Big Tech AI battle that is set to hit its next gear of investments over the coming months with Microsoft now leading the race.”
Ives rates Microsoft stock as outperform with a 12-month price target of 280.
Meanwhile, Alphabet (GOOGL) unit Google on Monday formally announced its conversational AI service called Bard. Bard is a generative AI chatbot based on LaMDA, short for “Language Model for Dialogue Applications.” Bard is being released to “trusted testers,” ahead of a wider release to the public “in the coming weeks,” Chief Executive Sundar Pichai said in a blog post.
The Microsoft and Google announcements show the “AI battle is heating up,” UBS analyst Lloyd Walmsley said in a report. He rates Google stock as buy with a 12-month price target of 120.
On Tuesday, Google stock rose 4.6% to 107.64.
Google is holding its own AI event on Wednesday. And Apple (AAPL) is planning to hold its annual “AI summit” for employees this month at its headquarters in Cupertino, Calif., Bloomberg reported.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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