Colossal Artificial Intelligence Search Costs Pose Headwinds For Google's Bard And Microsoft's ChatGPT Ambitions

The wildly popular chatbot from OpenAI, which can draft prose and answer search queries, has "eye-watering" computing costs of a couple or more cents per conversation, the startup's CEO Sam Altman has said on Twitter.

The high costs posed a challenge for Alphabet Inc's GOOG GOOGL as Microsoft Corp MSFT showcased plans to embed AI chat technology into its Bing search engine, eyeing Google's search market share of 91%.

In a Reuters interview, Alphabet Chairman John Hennessy said that having an exchange with AI, a large language model, likely costs 10 times more than a standard keyword search. However, fine-tuning will help reduce the expense quickly.

Analysts said that even with revenue from potential chat-based search ads, the technology could chip into the bottom line of Alphabet with several billion dollars of extra costs.

Google, for instance, could face a $6-billion hike in expenses by 2024 if ChatGPT-like AI were to handle half the queries it receives with 50-word answers, analysts projected.

Higher computing power associated with AI search made it a costlier proposition than the conventional search. Electricity likewise adds costs and pressure to companies with carbon-footprint goals.

Microsoft CFO Amy Hood has told analysts that the upside from gaining users and advertising revenue outweighed expenses as the new Bing rolls out to millions of consumers. Another Google competitor, the CEO of search engine You.com Richard Socher shared a similar view.

Still, the costs prevented search and social media giants from launching an AI chatbot overnight, said Paul Daugherty, Accenture's chief technology officer. He emphasized accuracy and correct scaling.

Some looked to charge for access, like OpenAI's $20 monthly subscription for better ChatGPT service. 

Technology experts also suggested applying smaller AI models to more straightforward tasks, which Alphabet explored.

Google said a "smaller model" version of its massive LaMDA AI technology will power its chatbot Bard, requiring "significantly less computing power, enabling us to scale to more users."

Price Action: GOOG shares traded lower by 0.31% at $91.81 on the last check Wednesday.