MICROSOFT'S long-struggling Bing search engine will integrate the powerful capabilities of language-based artificial intelligence, CEO Satya Nadella said on Tuesday, declaring what he called a new era for online search.

"It's a new day for search... The race starts today," Nadella said at a launch event, marking the start of what Microsoft hopes will be an unprecedented challenge to Google's two-decade dominance of the search engine market, using the technology created by the developers of AI bot ChatGPT.

"This technology is going to reshape pretty much every software category," Nadella added at the event at Microsoft's Redmond, Washington, headquarters.

ChatGPT has sparked a gold rush in artificial intelligence technology (AI) with more than 100 million users testing the bot's capabilities, receiving essays, speeches, or law exam results within seconds to the consternation of educators and school authorities worried about cheating.

Microsoft hopes that beefing up Bing with ChatGPT-like qualities will radically update online search by providing ready-made answers using multiple sources instead of the familiar list of links to outside websites.

In its new format, Bing would review results from across the web and summarize them instead of merely presenting a list of links that the user must click and choose from.

"We applied the AI model to our core search ranking engine, and we saw the largest jump in relevance in two decades," said Yusuf Mehdi, a Microsoft vice president.

On more complex searches, like planning a trip or buying a TV, an interactive chat mode would appear, asking for details on what is being requested.

The new Bing will more directly ape ChatGPT with a so-called creative option, in which the search engine will help the user write an email or prepare for a job interview, but unlike ChatGPT, always citing its sources, Microsoft said.

The new Bing will run on an OpenAI language model that is more advanced than the one behind ChatGPT, meaning that responses would be more up to date and benefit from stronger computing power.

Microsoft's Edge browser will also get souped up by AI features, including with summaries of web pages or ideas for social media posts based on a few inputs.

OpenAI, which developed ChatGPT, is a California-based startup founded in 2015, with early funding from Elon Musk among others. Microsoft invested $1 billion in OpenAI in 2019 and just inked a new multi-billion deal with the firm.

Search is Google’s golden cash cow and any serious challenge to its dominance seemed unthinkable until ChatGPT burst onto the scene two months ago.

Google's search engine holds 84 percent of the global market share, bringing in tens of billions of dollars in ad sales every quarter and making up more than two thirds of the tech giant’s total revenue. Bing's market share stood at nine percent last year.

"Competition is what really breeds innovation. And at the end of the day, that's what we're doing today," said Jordi Ribas, a Microsoft vice president who has been working on Bing for 15 years.

- 'Shot across the bow' -

According to reports, Google declared ChatGPT's massive success a "code red" threat to the company with teams reassigned to brainstorm a swift answer and accelerate ongoing research on AI.

Spooked by the unexpected rivalry, Google on Monday preempted Microsoft's announcement and said that it was about to deliver its own version of ChatGPT, a bot named Bard that would also provide near immediate answers upon request.

Chinese search engine giant Baidu on Tuesday said it was preparing to put out an AI-powered chatbot, named "Ernie Bot," though the launch date was unknown.

"We view this as the first shot across the bow in this Big Tech AI battle that is set to hit its next gear of investments over the coming months with Microsoft now leading the race," said Dan Ives of Wedbush Securities.

Despite the new arms race in Big Tech, ChatGPT and similar bots continue to make mistakes and it remains unclear whether the technology, known as generative AI, will be able to completely supplant search as we currently know it.

Google has already integrated more conversational techniques into its search engine, and on Monday said it will roll out more features based on ChatGPT-like technology in the coming weeks.

Before the release of ChatGPT, OpenAI had wowed tech geeks with Dall-E 2, a software that creates digital images with a simple instruction.