Alphabet Inc. (GOOG) Stock: Shares Jump as Google Expands AI Search Capabilities

TLDR:

Google is expanding “AI mode” in search to all US users, causing shares to rise 5.6% BMO Capital maintained an Outperform rating with a $200 price target for Alphabet Google’s Gemini AI app has over 400 million downloads, with AI Overviews reaching 1.5 billion users New features include Gemini 2.5 Flash, Project Mariner, and AI agent capabilities for Chrome Google faces growing competition from AI chatbots like ChatGPT but still holds 90% of the search market

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Alphabet Inc. shares gained after announcing the expansion of “AI mode” to all US users, showcasing the company’s commitment to transforming its core search business. The stock rose as much as 5.6% on Wednesday as analysts expressed confidence in Google’s ability to adapt its search product for the AI era.

Alphabet Inc. (GOOG)

Google CEO Sundar Pichai emphasized the company’s accelerated pace of innovation at their developer conference in Mountain View, California. “We want to get our best models into your hands,” Pichai said. “So we are shipping faster than ever.”

The announcement comes as Google faces growing competition from AI chatbot products like OpenAI’s ChatGPT and Perplexity. These rivals are increasingly becoming the first stop for online queries.

Despite these challenges, Google maintains about 90% of the search market. This gives the company a major advantage over competitors.

“Google Search is bringing gen AI to more people than any other product in the world,” Pichai told reporters.

AI Innovations Across Google Products

The AI mode feature acts as a tab in search where users can interact directly with AI models, similar to ChatGPT. It allows users to ask complex questions and follow up with additional queries.

Liz Reid, who leads Google Search, described the feature as “building the future of search” during a media briefing. “It creates this time where you can truly ask anything, and that searching starts to feel really effortless.”

Google also announced several other AI advancements at the conference. The company plans to release Gemini 2.5 Flash, a faster version of its flagship model, this summer.

🚨 BREAKING: Google just turned Gemini into an AI operating system.

At I/O 2025, they launched a full suite of tools that go way beyond chat.

Here’s what just dropped and it’s wild: 🧵👇 pic.twitter.com/K8ssBQ2R78

— Shruti (@heyshrutimishra) May 20, 2025

Additionally, Google is testing a model called Deep Think that excels at coding and reasoning. The company will bring AI agent capabilities to its Chrome browser, search, and the Gemini app.

Google showcased Project Mariner, a web-based assistant that can present options from across the internet to users. They’re also testing ways to help users ask more complex questions for sports and finance.

Many of these features will initially be available to paid subscribers. Google announced a new $250 tier in its subscription plan, AI Ultra, for users who want more access to the latest technology.

Analyst Confidence Grows

BMO Capital Markets maintained its Outperform rating for Alphabet with a $200 price target following the announcements. According to InvestingPro data, analysts’ targets for Alphabet range from $160 to $240.

The endorsement comes after Google’s annual Marketing Live event, where the company shared significant developments with the advertising community. BMO Capital Markets noted improved return on ad spend (ROAS), with advertisers now seeing $6 returned for every $1 invested in Search.

The analyst highlighted that AI is optimizing existing commercial queries and unlocking new ones, expanding opportunities for advertisers to reach target audiences.

In addition to Search improvements, YouTube’s advertising efficiency is increasing. AI has been key in improving YouTube’s ROAS, an important metric for advertisers.

The continued investment in AI across Google’s services demonstrates the company’s commitment to maintaining leadership in digital advertising. BMO Capital’s maintained Outperform rating reflects confidence in Alphabet’s strategic direction and growth potential.

Stifel, Citi, and JPMorgan all reaffirmed their Buy ratings with targets ranging from $195 to $200. These analysts cited Alphabet’s innovations in AI Mode and growing user engagement with its Gemini App.

Wells Fargo maintained an Equal Weight rating with a $175 target, noting the broader rollout of AI Mode and its implications for search functionality.

Google’s Gemini AI app has already reached more than 400 million downloads. AI Overviews, the answers at the top of search queries, now has more than 1.5 billion users.

Google is also making advances in AI filmmaking with the release of a platform called Flow. This tool will allow people to use natural language to describe movie shots and manage characters, locations, and objects in a narrative.

The company’s latest video generation model, Veo 3, can generate videos with contextual audio. This includes background noises like traffic or even dialogue between characters.

As Google continues to roll out new AI features, it faces the challenge of ensuring responsible AI development. Eli Collins, a vice president of product management at Google DeepMind, emphasized that the company is not “trying to build a slop machine” but rather tools that help people “bring a creative vision to life.”

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