On Tuesday, Alphabet’s Google will kick off its annual developer conference with a series of announcements highlighting its substantial investment in artificial intelligence, while addressing concerns about the future of its business.
Following the emergence of generative AI as a potential threat to Google’s stronghold in organising and retrieving information on the internet, the I/O conference in Mountain View, California has taken on a sense of urgency. Google has recently become more assertive in claiming that it has caught up with competitors, particularly after Microsoft-backed OpenAI’s release of ChatGPT took them by surprise. Key executives, including CEO Sundar Pichai, have frequently emphasised the leading position of Google’s Gemini AI models on public leaderboards, which surpass those of competitors such as OpenAI and Meta.
As consumers become more familiar with AI chatbots, investors are eager to see how aggressively Google will disrupt its search advertising business, which contributed significantly to the company’s $350 billion revenue in 2024. A recent dip in Alphabet’s stock value followed testimony from an Apple executive in an antitrust case suggesting that AI offerings had reduced searches on Apple’s Safari web browser for the first time. Analysts have begun re-evaluating Google’s historically dominant market share of around 90% in search, now estimating it to be between 65% and 70% when factoring in AI chatbot usage.
Legal challenges, such as antitrust cases seeking the divestiture of parts of Google, including its Chrome browser, could further shake Google’s market standing. The company’s increased investment in AI accounts for a significant proportion of its projected $75 billion capital expenditure this year, up from $52.5 billion in 2024. In recent years, Google has integrated more AI into its search engine through features such as AI Overviews, which provide generative AI summaries above traditional search results, and AI Mode for handling complex queries.
This year’s announcements are expected to cover updates to search functionality and Google’s progress towards a ‘universal AI agent’. Google’s efforts to monetise AI include inserting ads into AI Overviews and growing revenue streams such as the Google One consumer subscription service, which has surpassed 150 million subscribers with access to exclusive AI capabilities.
Written by Kenrick Cai, Jeffrey Dastin and Greg Bensinger in Mountain View, California. Edited by Sam Holmes.
