When Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) stock rolled out its AI-generative search feature named Search Generative Experience (SGE), it was perhaps the biggest change to its Google product ever.
On top of being perhaps the biggest change, it is certainly the most controversial. One might wonder what extra usefulness is being added to the user experience (aside from convenience) by having AI responses embedded into Google. Was this change not somewhat redundant? Users can use Gemini directly if they want AI to assist them with their searches. Although the feature is experimental and users can opt in or out of it, its presence seems self-serving to me rather than being designed to aid the end user.
Publishers have also taken up arms against Alphabet stock for its AI allegedly stealing their stories and content without providing them with fair compensation. I feel that with the proliferation of AI, there’s more than a reasonable chance this will accelerate regulations against it.
Advertising Practices Challenged
Thirty-two European media companies which include some of the largest media houses such as Axel Springer and Schibsted have joined a complaint against Google in which the company has been accused of abusing its dominance in the market to the tune of 2 billion euros.
Most notably, this lawsuit relates to a wider trend examining whether Google’s ad tech unit is abusing its market power, thereby putting it in the crosshairs of regulators. Due to the complaints raised by the European media companies, the French Competition Authority and the European Commission are considering fines of up to 220 million euros.
Dominant players in tech such as Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:META), and of course, Alphabet allegedly abusing their positions for unfair advantages have become nothing new over the last few years. However, monitoring the situation in Europe is vital for GOOG investors. We’re already seeing the cascading effect of new lawsuits at least partially leaning on the precedent of older ones to establish credibility, even if not formally recognized elsewhere in a court of law. I feel that this trend will continue until formal regulations take over.
Alphabet Probed in Europe
Amid a new law in the European Union called the Digital Markets Act, Alphabet stock as well as Apple (NASDAQ:AAPL) and other tech giants could face probes for potentially anti-competitive practices.
What stands out to me is the speed and decisiveness of the E.U.’s actions. The DMA only came into effect on March 7th with the probe launching a few weeks after, and already we’re seeing investigations launched. This suggests to me that E.U. regulators are serious about enforcing this new law and aren’t willing to give tech giants much leeway.
I find it particularly interesting that the probes focus on specific areas for each company. For Alphabet and Apple, it’s about their app stores and whether they’re truly allowing developers to offer deals outside these platforms. Google is also under scrutiny for potentially favoring its own services in search results – an issue that’s been contentious for years.
As I consider the broader implications, I can’t help but think about how this might influence tech regulation globally. Will other regions follow the E.U.’s lead?
CEO Calls For Regulations
Finally, let’s not forget that at the height of ChatGPT-fueled mania upon its initial release in 2020, Alphabet’s own CEO, Sundar Pichai, was calling for the regulation of AI
It is rather peculiar that Pichai suggested the E.U.’s General Data Protection Regulation (GDPR) as a possible framework for AI regulation. This makes me think that although companies in the technology sector found it difficult to embrace GDPR, there is acknowledgment of it as a model regulation.
The article also shows the differences between the E.U.’s standpoint and the Trump administration’s standpoint at the time. The E.U. was thinking about extreme measures like prohibiting the use of facial recognition in public spaces while the U.S. was more calculating towards lighter approaches to regulate technology.
I agree that regulation of AI is a necessity, but a Trump-led, America-first foreign policy could throw a spanner in the works if he is reelected, with Europe becoming perhaps a training ground for how AI regulations for big tech would actually look and operate.
Therefore, I believe that the best course of action is for investors to hold off on continuing to buy shares in Alphabet stock due to the rising regulatory risks. The increasing scrutiny from European regulators and potential global ripple effects of AI regulations means that investors are best to wait and see, especially after the U.S. elections are over.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.