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Google announced AI-powered features on Wednesday but a mistake in an ad caused its stock price to drop.
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Microsoft recently partnered with OpenAI, the maker of ChatGPT, and unveiled new products.
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Both Google and Microsoft are trying to integrate AI chatbots into their search engines.
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Google's Bard bot made an error in an ad about the James Webb Space Telescope and caused the stock price to fall by 7%.
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Investors were also unimpressed with Google's AI announcements.
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The public release of Bard is expected in the coming weeks.
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Analysts believe Google rushed its announcement due to pressure from Microsoft, but Google denies this.
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Google's AI improvements include maps, translation, and image recognition.
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Microsoft is also incorporating AI into its Office suite and Teams app.
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ChatGPT holds the promise of offering ready-made answers to users and replacing traditional search results. Google designated the success of ChatGPT as a "code red" threat, leading to the return of its co-founders for a response.