Microsoft’s Bing finally has a chance to take a bite out of Google with ChatGPT. But it has to move fast.

• Microsoft finally announced a new ChatGPT-enhanced Bing that can challenge Google's search dominance.
• However, its competitors have wizened up and are working on releasing their AI-powered products.
• Microsoft must ensure its new Bing is better and faster to keep its first-mover advantage.

Microsoft on Tuesday announced the integration of ChatGPT, OpenAI's viral AI chatbot, into its Bing search engine, marking one of the first times the company could directly challenge search giant Google.

Microsoft invested more than $1 billion in ChatGPT creator OpenAI when it first began, and has since put in an additional $10 billion to the company. Even before Microsoft officially launched its ChatGPT-powered Bing on Tuesday, insiders already felt that the looming threat of an OpenAI/Microsoft team-up would mark the first time in decades Google would feel pressure to improve. Now, that dream is becoming a reality.

In a note sent to clients after Microsoft's announcement, Wedbush said it believes Bing's new ChatGPT integration "is set to challenge the web search market by grabbing market share as users see increased benefits and a new user experience."

"It's been a long time since search has been disrupted and the announcement of the new Microsoft Bing, powered by the next iteration of ChatGPT appears set to be that first challenger to Google's long unchallenged number one market position," said Daniel Newman, analyst with Futurum Research.

But while ChatGPT pushes Microsoft and Bing forward, Google has been aggressively reminding everyone that it's been doing the AI thing for a long time. After all, OpenAI's founders are former Google employees, and the "T" in "GPT" stands for "Transformers," an AI technique invented at the search giant.

Alphabet CEO Sundar Pichai said during the company's fourth-quarter earnings call that more AI-powered features would be coming to Google's popular products, and the company will hold an event in Paris on Wednesday specifically to show it off. Google announced its own ChatGPT competitor, called Bard, this week too.

And it isn't just Google, either. Bloomberg reported that Chinese internet company Baidu saw its stock soar after announcing its generative AI called Ernie Bot. 

In other words, Microsoft may have the upper hand in the AI search wars for now, but not if its competitors have anything to say about it.

"We suspect these technologies will be leveraged by all vendors and wonder if Microsoft can realize an outsized benefit relative to others," analysts at Guggenheim Research said in a note after the announcement.  

Microsoft has to move fast to keep its advantage

Bing has consistently been a distant second to Google Search for decades. Estimates hold that Bing has a 9% market share of search traffic. Google, on the other hand, has a firm grip on as much as  80% of the market.

Microsoft promises that the new, more powerful Bing will bring new features that help users by suggesting brands or travel locations via asking questions in simple language — helping users find information faster while inputting fewer keywords.

This is also just the tip of the iceberg, as Microsoft has expressed interest in bringing ChatGPT into software like Microsoft Excel and PowerPoint. 

Still, with its sizable war chest and long history with developing AI in-house, Google appears ready for a fight. In much the same manner as Microsoft's master plan, Google plans to bring ChatGPT to its own suite of software, including Gmail and Google Docs.

Erik Hamilton, head of search for marketing agency Good Apple, tells Insider that those Google tools, including the Google Chrome browser, have a lot of fans, and the AI tools will help keep them around rather than risk defection to Microsoft.

In other words, unless Microsoft can attract a lot of Bing users very quickly using these new AI capabilities, analysts believe that Google will catch up so quickly that it'll render the first-mover advantage moot and we'll see the same dynamics between the two play out.

Ultimately, Microsoft may finally have the chance to start chipping away at Google's dominance, but the real winner at the end of all of this search back and forth is AI itself. 

"As a technology giant, Microsoft's effort will likely drive further application of AI and machine learning in the industry, but it will not likely affect financials for some to come if it ever does," analysts at Guggenheim said. 

The AI wars escalated with Google announcing it will release Bard, a ChatGPT-like chatbot, for public use in February. Along with AI coming to Gmail and Google Docs, and AI-enhanced search results, Google wants to make sure it can stand against the coming wave from Microsoft. 

Additional reporting contributed by Ashley Stewart.