Alphabet kicked off its annual developer conference on Tuesday with a series of announcements highlighting its significant investment in artificial intelligence as it aims to defend its core business.
The Google I/O event in Mountain View, California, took on a tone of urgency amid rising competition from generative AI technologies, which pose a fresh challenge to Google’s dominance in organizing and retrieving online information.
After initially appearing slow to respond to Microsoft-backed OpenAI’s ChatGPT, Google has ramped up efforts to assert its lead, with CEO Sundar Pichai pointing to the strong performance of its Gemini AI models over competitors including OpenAI and Meta.
With consumer use of AI chatbots maturing, investors are closely watching how aggressively Google will disrupt its search advertising business, which generated the bulk of Alphabet’s $350 billion revenue in 2024. Earlier this month, Alphabet’s stock lost $150 billion in value after an Apple executive testified that AI offerings had caused a decline in searches on Apple’s Safari browser for the first time.
This shift has led analysts to reassess Google’s search market share, traditionally estimated near 90 percent. New estimates place it between 65 and 70 percent when factoring in AI chatbot use, with some forecasts projecting a drop below 50 percent within five years.
Behavioural changes are driving consumers away from traditional search toward AI chatbots.
Google also faces legal risks, including antitrust cases from the U.S. Justice Department that seek to force the sale of parts of the company, such as its Chrome browser.
Alphabet plans to invest $75 billion in capital expenditures this year, largely focused on AI, up from $52.5 billion in 2024. Pichai reaffirmed these spending plans despite market uncertainties.
Google has integrated AI into its core search engine with features like AI Overviews, which generate summaries atop search results, and AI Mode, which uses AI to address complex queries. Tuesday’s announcements are expected to include further updates to search and progress on a “universal AI agent.”
The company is also exploring new revenue streams from AI, with its Google One subscription service surpassing 150 million subscribers. The service recently introduced a $19.99 monthly plan offering AI capabilities unavailable to free users.
