Google Dodges Breakup, Thanks Unexpectedly to AI: The OpenAI Factor

Google Dodges Breakup: The Impact of the Rise of AI

Alphabet (GOOGL.O), Google's parent company, managed to avoid a severe penalty in the US antitrust case, with its core businesses like the Chrome browser escaping dismemberment. The ruling allowed Google to retain Chrome and its high-value agreements with Apple, while prohibiting exclusive search agreements.

Unexpected Thanks to a Strong Competitor: OpenAI

Google may owe an unexpected debt of gratitude to its rival OpenAI. A federal judge ruled that the rise of generative AI has made the search market more competitive, weakening the US Department of Justice's rationale for dismantling Google's empire. Had the lawsuit succeeded, products like YouTube or Chrome could have been forced to become independent companies.

ChatGPT's Role in Tipping the Scales

In his ruling, Judge Amit Mehta repeatedly cited the rise of generative AI, spearheaded by OpenAI's ChatGPT, as creating unprecedented competition in the search landscape. While generative AI hasn't entirely replaced Google search, AI startups could "ultimately become disrupters." He noted that tens of millions of users are using generative AI chatbots like ChatGPT, Perplexity, and Anthropic's Claude to obtain information they previously sought through search engines.

Massive Investments in AI

OpenAI disclosed in August that ChatGPT's weekly active users are approaching 700 million, up from 500 million in March. In July, Google CEO Sundar Pichai stated that Google's ChatGPT competitor, Gemini, has 450 million monthly active users. Mehta also noted that ChatGPT has sparked an AI investment frenzy, leading to a significant influx of capital into AI startups whose products directly threaten traditional internet search. He wrote that these companies are "better positioned to compete with Google than any traditional search company in decades" and are rapidly furthering the commercialization of queries and search.

Historical Irony: From Crisis to Opportunity

If OpenAI hadn't launched ChatGPT in 2022, none of this would have happened. Ironically, ChatGPT's release was initially seen as a moment of crisis for Google, as Google was considered the absolute dominant player in the AI field before OpenAI's rise. Since then, Google has engaged in fierce competition with OpenAI, quickly launching its own chatbot Bard after ChatGPT. And according to an investigation by Business Insider, Google has even heavily relied on ChatGPT to improve its products.

Future Challenges: AI's Impact on Search

Google remains threatened by the new information retrieval methods offered by OpenAI. In May, Apple reported that search volume is declining as people turn to AI, leading to a significant drop in Alphabet's stock price. But this is in stark contrast to the record high the stock reached in after-hours trading on Tuesday, thanks to the relatively lenient outcome in the antitrust case. In a statement, Google said that Judge Mehta's ruling correctly recognized that the emergence of AI has profoundly changed the industry, giving people more ways to access information. "This confirms the view we have been emphasizing since the case was filed in 2020: competition is fierce, and people can easily choose the services they want," the statement read.

Other Cases Pending

Additionally, Google doesn't have to divest the Android operating system. In another lawsuit filed by the US Department of Justice against Google, scheduled to begin in September, the judge has already ruled that Google illegally monopolizes online advertising technology, and remedial measures will be determined at that time. The two lawsuits filed by the US Department of Justice against Google are part of a broad bipartisan crackdown on big tech companies that began during the first term of US President Donald Trump and involve Meta Platforms, Amazon, and Apple.