Microsoft has fired the first volley in a new AI arms race by integrating a ChatGPT-like feature into its Bing search engine.

Microsoft made the snap announcement on Wednesday with CEO Satya Nadella calling it "a new way to search”.

“AI will fundamentally change every software category, starting with the largest category of all – search,” he said in a statement.

A demo version of the new Bing is currently available with the full-featured product coming soon.

Alongside the usual search results, the demos show a new box opening up with Bing's curated suggestions written in the conversational tone we have become used to seeing with ChatGPT.

Importantly, Bing also includes links to where its ideas – such as recipes or travel options – come from.

Microsoft’s Edge browser is also getting an AI makeover with features to help read and summarise documents or compose emails and social media posts.

Bing’s AI searches use a different large language model to the one powering OpenAI’s ChatGPT, one that OpenAI CEO Sam Altman said was “one of our next-gen models”.

“I believe that using AI to transform critical tasks like these … is the beginning of a new era,” Altman said.

In an interview with the Wall Street Journal published alongside the Bing AI announcement, Nadella was confident that an AI-powered Bing would finally bring “a real competitive race” to the search market which Google dominates with 93 per cent of global searches going through its servers.

Bing is a distant second, owning just three per cent of the search market.

“I feel like a new race is starting with a completely new platform technology,” Nadella said.

“We now have not only the current information that you would expect from a search engine, but you can now have a full conversation around that current information – and all the other information that came before.”

Big tech fights over AI search

Microsoft’s Bing announcement came a day after Google released the first details of its answer to ChatGPT: Bard.

Bard is built on Google’s Language Model for Dialogue Applications (LaMDA).

LaMDA made headlines last year after a Google engineer – whose job was to talk with the language model and make sure it didn’t say anything problematic – claimed LaMDA was sentient and tried to get lawyers to help grant it status as a person.

“Bard seeks to combine the breadth of the world’s knowledge with the power, intelligence and creativity of our large language models,” Google CEO Sundar Pichai said.

“It draws on information from the web to provide fresh, high-quality responses.”

A recent ad for Google's AI-powered Search platform featured an incorrect answer to a question.

The sudden popularity of ChatGPT spooked Google executives who saw the threat to its search business and reportedly went so far as to call it a “code red” situation, bringing in the company’s founders Larry Page and Sergei Brin to consult on how to best bring AI into the business.

Google has been a leader in AI research in its own rights – the ‘T’ in ChatGPT stands for ‘transformer’, a deep learning model Google invented – but has failed to capitalise on the technology.

Its AI research arm, Google Brain, was one of the few areas of the business that was relatively unscathed in a recent bout of layoffs.