Alphabet's (GOOGL -0.02%) Google search engine has dominated the web for nearly two decades as the tool people use to look up anything and everything. "Googling" has become a verb, and more than eight in 10 global searches are done through Google.

But that could change. Microsoft's home-run partnership with OpenAI, the creator of ChatGPT, has revived user interest in the Bing search engine, putting a competitor in a position to threaten Google's dominance -- arguably for the first time. The stakes are high for Alphabet, which has scrambled to launch Bard, its own large language model.

Can Alphabet catch up? What are the stakes if it can't? Here is what you need to know.

ChatGPT is becoming the verb of generative AI

OpenAI's ChatGPT is currently the fastest-growing application in history. The generative AI chatbot can respond to queries with conversation-like results based on information it pulls from the web. OpenAI launched ChatGPT to the public in late 2022, and it's become a sensation. It cracked 100 million monthly users within weeks of launch and surpassed 1 billion monthly page views in February.

ChatGPT's popularity is no fluke. Outside of a brief bump when Alphabet released Bard on March 21, ChatGPT remains the overwhelming leader in search engine interest, according to Google Trends. ChatGPT's product is becoming synonymous with generative AI, giving it the same verb-like brand power that has benefited Google for years.

You don't win a war in the first battle, but the opening skirmish has gone to ChatGPT and, by extension, Microsoft, which powers ChatGPT computing loads with its Azure platform. The onus is now on Alphabet to muscle its way back into the fight.

What if Alphabet can't?

Ironically, Microsoft sits in the AI stock pole position with the most to gain, while Alphabet is chasing as the company with the most to lose. Search engines make money by selling ads on search result pages. Bing has been an almost negligible part of Microsoft's business because it historically attracted a low-single-digit percentage share of global search traffic.

For Alphabet, the search engine is its most important business by a long shot. The company does roughly $160 billion in annual revenue related to Google searches -- that's 56% of its trailing 12-month revenue. Investors must consider what could happen to Alphabet's growth if its search engine revenue began shrinking. The Google segment grew revenue by just 2% in Q1, so losing market share could have a noticeable impact on Alphabet.

Even ceding 10% of Google's search revenue to Bing could mean a hit as big as $16 billion to Alphabet's annual top line.

Investors are at a crossroads with Alphabet's stock

The threat of ChatGPT has spooked the market enough to push Alphabet below its 10-year average price-to-earnings ratio. It's trading at nearly 24 times earnings, a 20% discount to historical norms.

Investors are left at a crossroads. Perhaps it will turn out that ChatGPT's popularity is just part of the AI hype cycle, and its momentum will cool -- or Google might pivot and hold off any significant threat from Bing. If that's the case, then we could, in hindsight, come to view today's share price as having been a great buying opportunity. But if ChatGPT and Bing are on course to disrupt Alphabet's search engine moat, the stock's recent slump could be justified.

GOOG PE Ratio Chart

GOOG PE Ratio data by YCharts.

It's impossible to know yet which of those outcomes will be closer to the truth, which is why investors might consider approaching Alphabet cautiously. Bullish investors can buy shares slowly using a dollar-cost averaging strategy rather than jumping into what could turn out to be deep water with both feet.