An update procedures takes up noticeable amounts of CPU time and bandwidth. Automatic updates means your system slows down arbitrarily, often with no indication as to why. Users are able to make observations at the level of "since I installed software X, my computer doesn't work properly anymore" and interpret that as a virus infection.
Maybe they can't weigh the downsides of new and old versions, but they can weigh the downsides of now and later. Usually they go for later, which is a different problem.
A pretty dim view of users, but does that mean that Chrome is not for technical people? It's for an audience that is too dumb to be capable of understanding auto-update? (This audience, incidentally, does not exist: users aren't that dumb.)
In either case, the Right Thing was discovered long, long ago: sensible defaults. Users who don't understand the software needn't worry, and those that know what they're doing can make the appropriate decision.
It bugs me to no end when developers take this parental tack with users, as if we were not only responsible for producing the software, but also for ensuring the user doesn't do anything to harm themselves. Put an are-you-sure dialog box in the way, but don't try to force anything on your users. Even if you know better, you're over-stepping and your second-guessing of the user is misguided.
Maybe they can't weigh the downsides of new and old versions, but they can weigh the downsides of now and later. Usually they go for later, which is a different problem.