Alphabet Bets Big on AI Search — Will GOOG Stock Keep Its $50B Ad Engine Running?

Back in the day, typing into Google (GOOG) (GOOGL) felt like flipping on a light switch — instant access to the world’s knowledge. For years, that simplicity drove Alphabet’s search engine to near-total dominance, pulling in billions in advertising revenue. However, that dominance is now under threat, and Google has just made a daring move to defend the crown.

At its annual developer conference, the company introduced “AI Mode” — a new tab within Google Search that replaces the traditional list of blue links with Gemini-powered AI answers. Ask a question, and you’ll get a human-like response — fast, clean, and ad-lite.

From an investor’s perspective, this marks a pivotal shift as Google is rewriting the business model.

Why Now?

Google still owns over 90% of global search traffic, generating $50.7 billion in search ad revenue in Q1 2025 alone. But AI chatbots are starting to chip away at that. Although the search gap is still substantial, x373 in favor of Google’s search engine, to be exact, tools like ChatGPT and Perplexity are gaining traction, especially among younger users.

In addition, Apple (AAPL) recently revealed that Google searches inside Safari dropped for the first time in 20 years, insinuating a crack in the foundation.

The soon-to-be-launched AI Mode is part of a larger push to embed Gemini across the Google ecosystem, from search to shopping. The company even plans to let users upload photos and virtually try on clothes, turning AI into a commerce engine. Ads aren’t going away, but they’re being reimagined — integrated directly into conversational responses instead of stacked on top of search results.

As Robby Stein, Google’s VP of Search, put it: ads are “part of the content mix people want.” Maybe. But if AI Mode answers questions too well, users might skip the scroll and the clicks that fuel Google’s cash machine.

The Main Street Data (MSD) revenue chart showcases Google’s dependence on its search engine for the bottom line.

What This Means for Alphabet Stock

Alphabet remains a core holding for many long-term investors, and with good reason. But this shift adds real strategic risk. The company is walking a tightrope: innovate enough to compete with ChatGPT, without undercutting the very model that drives its profits.

Meanwhile, Alphabet shares slid earlier this month after the Apple revelation and growing concerns about AI competition.

The bottom line is AI Mode is a bold move, but it’s also a high-stakes one. If Google gets it right, it will keep users and advertisers in the ecosystem. If not, even a small loss in search traffic could turn into billions in lost revenue.

TipRanks investors should watch two things closely: user adoption of AI Mode and whether Google finds a way to monetize answers without links.

What Is the Price Target for GOOG Stock?

Currently, Wall Street firmly believes in Alphabet’s long-term prospects, with the stock sporting a Strong Buy rating. The average price target for GOOG stock is $201.14. This implies a 21.67% upside potential.

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