Alphabet's Google opened its annual developer conference on Tuesday with a wave of announcements highlighting its massive investment in artificial intelligence, while also
attempting to ease concerns about the future of its business.
The I/O conference, held in Mountain View, California, has taken on a more urgent tone since the emergence of generative AI began challenging Google's long-standing dominance in organizing and retrieving online information.
In recent months, Google has become more vocal about its progress, emphasizing that it has closed the gap with competitors after initially seeming unprepared for the release of ChatGPT by Microsoft-backed OpenAI.
Top executives, including CEO Sundar Pichai, have frequently pointed to the strong performance of its Gemini family of AI models on public benchmarks, where they have outpaced offerings from rivals such as OpenAI and Meta.
With more consumers now using AI chatbots, investors are closely watching how far Google is willing to go in changing its search advertising model. This area has traditionally been the foundation of the company's $350 billion in revenue for 2024.
Earlier this month, Alphabet’s stock value dropped by $150 billion in one day after an Apple executive testified in one of Google's antitrust cases that AI tools had caused a drop in search activity on Apple’s Safari browser for the first time.
Following that testimony, some analysts began rethinking how to measure Google's dominance in search. While traditional methods placed Google's market share at about 90 percent, a note from Bernstein this month estimated it at 65 to 70 percent when factoring in AI chatbot use. Analysts at Wells Fargo suggested the figure could fall below 50 percent within five years.
These assessments reflect a shift in consumer behavior, with more people turning to AI chatbots instead of conventional search engines.
Google's position could be further impacted by legal battles, especially two antitrust lawsuits from the U.S. Department of Justice, one of which calls for the separation of parts of the company, including its Chrome browser.
Alphabet is forecasting $75 billion in capital spending this year, most of which is being funneled into AI projects. This marks a sharp rise from the $52.5 billion the company spent in 2024. In April, CEO Sundar Pichai reaffirmed these plans despite ongoing economic uncertainties such as tariffs.
Over the past two years, Google has added more AI to its core search product, mainly through AI Overviews, which are generative summaries shown above traditional search results, and AI Mode, an experimental feature designed to handle more complex questions using advanced AI.
Tuesday’s announcements are expected to feature additional enhancements to search as well as progress on what Google describes as a “universal AI agent.” At last year's I/O, the company introduced Project Astra, a prototype that could engage users in real-time conversations about whatever was in view on their smartphone camera.
Google began testing ad placements within AI Overviews last May but has so far avoided any sweeping changes to the format.
At the same time, Google is expanding other revenue sources to capitalize on AI. The company recently told Reuters that its Google One subscription service has surpassed 150 million users, with “millions” subscribing to a $19.99 monthly plan that includes AI tools not available to free-tier users.
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