Alphabet Inc., parent company of Google, is nonetheless facing some big changes to its core search business. With more AI-first search models like ChatGPT becoming the go-to resource, the company is under immense pressure. One of the key pillars of Alphabet’s search business—a major driver of revenue and profitability—is now being called into question by these new emerging technologies. The unfortunate situation has been enough to move Jim Cramer’s Charitable Trust to do something. On 1/4/23, they sold 400 shares of Alphabet at approximately $153/share.
Alphabet’s dominance in the search industry has long been undisputed, with its search business contributing to more than half of the company’s total annual revenues. That’s been a rich vein historically, the cornerstone of the conglomerate’s profits. With the advent of AI-first search models, that haven is starting to get chipped away. Young users are already preferring these new and exciting models over classic Google searches, which is a good sign for a digital future.
Among the AI-first search models gaining traction is ChatGPT, which has seen a significant uptick in weekly active users since December. The chatbots – especially the lucrative generative AI chatbots like ChatGPT and Bard – are starting to significantly eat into … well, Google’s search business. Rivals such as Gemini and Grok are increasing the competitive heat on this traditionally fortified segment. As these new AI models grow in smartness, they represent some serious competition to the current leader in search.
The decision by Jim Cramer’s Charitable Trust to sell its position in Alphabet underscores the challenges facing the company amid this technological evolution. The trust’s move reflects a strategic response to the shifting dynamics within the search industry, where AI-driven models are rapidly advancing and redefining user expectations.