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Google is firing back at Microsoft, and investors seem to be loving it

Here's all of the big AI news from Google's I/O

Google (GOOG, GOOGL) came out swinging a sledgehammer of AI aimed directly at rival Microsoft (MSFT) during its big I/O developer conference this week. Months after Microsoft unveiled its Bing chatbot and search engine experience, Google fired back with its own AI-powered search platform, while also making Bard available to all users.

The moves are meant to prove that Google, which helped pioneer the technology behind Microsoft partner OpenAI’s ChatGPT, can match and exceed the Windows maker’s offerings in the nascent generative AI space.

And Wall Street seems to be taking note. Shares of Google’s parent Alphabet were up more than 5% in afternoon trading. Shares of Microsoft, meanwhile, were roughly flat.

Microsoft has been leading the AI conversation since it debuted its Bing chatbot in February. Google tried to preempt Microsoft’s announcement by revealing Bard a day before Microsoft showed off Bing to the press. But without a live demonstration, Google quickly found itself playing catch up.

James Manyika speaks during the Google I/O keynote session at Shoreline Amphitheatre in Mountain View, California, on May 10, 2023. (Photo by Josh Edelson / AFP) (Photo by JOSH EDELSON/AFP via Getty Images)
James Manyika speaks during the Google I/O keynote session at Shoreline Amphitheatre in Mountain View, California, on May 10, 2023. (Photo by Josh Edelson / AFP) (Photo by JOSH EDELSON/AFP via Getty Images)

New products

But on Wednesday, the company debuted a variety of new products meant to brush aside Microsoft’s threat to Google’s dominance.

The biggest announcement came by way of what Google calls its Search Generative Experience. The platform is a kind of reimagining of Google Search that uses generative AI to provide more expansive, conversational answers to your queries.

Type “Good bike for a 5-mile commute with hills,” and you’ll receive a series of tips on what to look for when buying a bike for commuting, as well as a list of ads for bikes with explanations about each of them.

From there you can ask follow-up questions about e-bikes, and eventually end up with the bike you might want to buy. If it looks like a familiar experience, it’s because it’s a similar layout to Microsoft’s Bing search engine.

Google’s Bard, meanwhile, is the company’s answer to Microsoft’s Bing chat bot. Both provide conversational answers to your queries and can provide follow up responses. Bard is also getting what’s called multimodal support, meaning you’ll be able to get answers as both text and images. Microsoft is working on the same thing for Bing.

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On the productivity front, Google announced a new Help Me Write feature for Gmail, which literally helps you write email responses to make getting through your inbox a little bit easier. Microsoft’s own Microsoft 365 productivity suite also offers generative AI features that help you put together things like cover letters in Word and presentations in PowerPoint.

Then there were Google's new generative AI features for Android phones. The company says it's Magic Compose, which will be available later this year, will let users change the style of their text in the Messages app. So if you ask someone to dinner, you can adjust the setting to "Chill," "Excited," or "Lyrical" and Magic Compose will alert your text to match.

Google also announced a new option for Android phones that will let you use generative AI to create new wallpapers.

Both companies are racing to become the leaders in generative AI at a point when the technology is still new to consumers. The boom in the area kicked off when OpenAI released its ChatGPT in November 2022. The platform quickly became one of the most popular apps on the internet, and sent companies into overdrive searching for a means to add similar features to their products.

For Google and Microsoft, the key is ensuring that generative AI helps drive user engagement that they can translate to advertising sales. But both companies need to tread carefully. Generative AI is prone to making up responses that sound shockingly true.

Those kinds of errors could impact user trust, hurting both the companies and any reason consumers have for using their products.

The race is on.

Correction: A prior version of this article misstated the release date for Google's generative AI wallpaper.

By Daniel Howley, tech editor at Yahoo Finance. Follow him @DanielHowley

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