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Alphabet Shares Surge Nearly 4% on AI Mode Rollout and Monetization Strategy

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Alphabet’s stock jumped 4% on Thursday, reaching its highest level in nearly three months, as investors responded positively to the company’s latest artificial intelligence (AI) initiatives announced at its annual developer conference.

The boost follows Google’s unveiling of “AI Mode”—a major update that allows users across the U.S. to toggle their search experience into an AI-powered interface. The new feature is designed to deliver more conversational and complex answers, positioning Google more competitively against AI-driven platforms like OpenAI’s ChatGPT.

Key Highlights:

  • AI Mode Launch:
    Now available to all U.S. users, AI Mode redefines traditional search by integrating generative AI responses directly into Google Search.

  • Monetization Strategy:
    Google also introduced a premium $249.99/month subscription plan aimed at power users, which could help offset the high infrastructure costs of AI development. Analysts expect further monetization of AI Mode to follow soon.

  • Market Response:
    Alphabet’s Class C shares rose 4% to $175.27, reaching levels not seen since February. Despite Thursday’s rally, the stock remains down about 7% year-to-date.

  • Analyst Confidence:
    Citi analyst Ronald Josey stated the updates reflect improving execution and offer reassurance that “Google can deliver continued search growth while ramping monetization.”
    He also noted that AI Mode could enable more targeted and relevant advertising, the backbone of Google’s revenue model.

Strategic Context:

Google CEO Sundar Pichai emphasized that the rise of generative AI does not entirely cannibalize traditional search. Instead, AI capabilities are expanding the types of queries users bring to Google, offering opportunities for deeper engagement and smarter ad placements.

Executives noted that more challenging user questions, which are often difficult to answer using traditional search algorithms, are now within reach thanks to AI—a potential goldmine for ad monetization and user retention.

Outlook:

With Alphabet doubling down on AI integration and monetization, analysts and investors are signaling increased confidence in the company’s ability to maintain leadership in search while competing in the evolving AI landscape.

Apple’s AI-Powered Safari Search Plans Challenge Google’s Online Dominance

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Apple’s move to introduce AI-powered search options in its Safari browser is emerging as a significant challenge to Google’s dominance in online search, with major implications for the tech and digital advertising landscape.

According to reports, Apple is “actively looking at” overhauling Safari by integrating new AI-based search alternatives such as OpenAI and Perplexity AI. This strategy directly targets Google, whose lucrative advertising business heavily depends on iPhone users searching via Safari — a privilege for which it reportedly pays Apple about $20 billion annually.

The development rattled investors, sending shares of Google-parent Alphabet (GOOGL) down 7.3% and erasing nearly $150 billion from its market valuation. Apple’s own stock dipped 1.1% on the same day.

Apple executive Eddy Cue testified during an antitrust case against Google that search activity on Safari had declined last month for the first time, as more users began relying on AI tools for information. This trend, if sustained, could mark a fundamental shift in consumer behavior — away from traditional keyword search engines and toward conversational AI and generative search technologies.

Google responded by asserting it continues to see growth in total search queries, including those from Apple devices, attributing the increase to tools like voice and visual search and newer features like “AI Overviews” that summarize results at the top of the search page. The company also plans to integrate its Gemini AI model into Apple devices through a potential deal expected by mid-2025.

Still, analysts warn that the end of Google’s default search position on Safari could have serious repercussions. Gil Luria of D.A. Davidson noted that if advertisers begin shifting budgets to competing AI-driven search engines, Google’s market share and revenue could suffer substantially.

Meanwhile, platforms like ChatGPT and Perplexity are gaining traction rapidly. ChatGPT, for instance, logged over 1 billion weekly searches in April and reported more than 400 million weekly active users in February.

The U.S. Department of Justice, which has filed multiple antitrust suits against Google, proposes banning exclusive deals like the one between Apple and Google as part of broader efforts to increase competition in the search market.

As generative AI reshapes how people seek and consume information, Apple’s Safari updates could open the door to a new era of search — one where Google is no longer the default.

Google Tests AI-Only Version of Search Engine with New “AI Mode”

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Google has launched an experimental version of its search engine that removes the traditional 10 blue links in favor of AI-generated summaries. This new feature, available to subscribers of Google One AI Premium, can be accessed by clicking on a tab labeled “AI Mode” alongside options like Images and Maps.

Robby Stein, Vice President of Product at Google, explained that the company had received feedback from power users who wanted AI responses for a broader range of searches. Google One AI Premium is a $19.99 per month subscription that offers additional cloud storage and access to exclusive AI features.

In its ongoing push to integrate AI into search, Google has introduced AI Overviews, which provide summaries of search results above the usual links to webpages. These Overviews are already available in over 100 countries, and last year, Google began incorporating ads into these AI summaries.

With AI Mode, the company takes this a step further by offering more detailed AI summaries with links to the sources. The traditional blue links are replaced by a search bar, allowing users to ask follow-up questions. Powered by Google’s custom Gemini 2.0 model, AI Mode is designed with advanced reasoning capabilities, making it more adept at handling complex queries.

This new development represents a significant move for Google, as it faces increased competition from Microsoft-backed OpenAI, which introduced search functions in ChatGPT last October. AI-driven search is now a major area of focus for Google, with Alphabet’s 2024 revenue—mostly driven by search-related advertising—under threat from emerging AI competitors.

However, the shift to AI-powered search has raised concerns. In February, educational technology company Chegg filed a lawsuit against Google, accusing the AI previews of diminishing the demand for original content and harming publishers’ ability to compete.