Wall Street positive on Google I/O event as AI Search takes center stage

Alphabet CEO Sundar Pichai took the stage on Tuesday at the Google I/O developer event to unveil a series of new features, including AI Mode with the goal of revamping Search. Commenting on the event, BofA said that Alphabet (GOOGL) is moving to offense on Search, with JPMorgan also “incrementally positive” after the first day of the Google I/O event. 

GOOGLE I/O KEYNOTE: Google’s CEO Sundar Pichai opened the I/O keynote with an “Everyday is Gemini season at Google.” He also made a series of announcements, including Ironwood coming to Google+ customers later this year. He also noted that Gemini App has now 400M+ monthly active users. Pichai introduced Google Beam, pointing out that the first devices with Google Beam — in partnership with HP (HPQ) – are expected to come to users later this year. Google rolled out Gemini Live on Android and iOS on Tuesday, with Project Mariner coming to Gemini API soon. Gemini SDK is now compatible with MCP tools. Also coming soon to subscribers is Agent Mode. Google also said that Project Astra, the mobile AI package that can react with real-time images and input, is coming to Android and iOS. Discussing personalization with AI, CEO Pichai said that with user permission, Gemini will be able to use information to power Personal Context, including in Gmail with personalized replies. 

The company introduced Gemini 2.5 Flash, generally available in June, with Gemini 2.5 Pro soon after. Google unveiled a new version of Gemini Diffusion, and said that Gemini 2.5 Pro Deep Think is currently available to trusted testers. The company also showcased Gemini Robotics. A new AI Mode in Search became available on Tuesday as users place longer and more complex queries. Among other announcements, Google said Gemini 2.5 is coming to AI Overviews and AI Mode, introduced Search Live, said Camera and Screen sharing are coming to android and iOS Gemini apps, and that Gemini will work while users browse the web on Chrome. The company also announced new Google AI plans, with Google AI Pro priced at $19.99/month and Google AI Ultra at $249.99/month. The company also noted that its Android XR Glasses will partner with Gentle Monster and Warby Parker (WRBY). 

MOVING TO OFFENSE: BofA says the Google I/O keynote’s slate of AI announcements underscore growing Gemini integration across the Google ecosystem. Given third-party benchmarks and slowing LLM innovation, the firm thinks “the catch-up phase for Google’s LLM capabilities is coming to an end” and that the company is “moving to offense” by going full AI Mode in search. Google is moving forward from AI testing and integration in search results with AI Overviews to offering full AI Mode general availability in search, notes BofA, which sees this as Google’s “Reels moment” as it is taking on a growing and well-funded competitor in Open AI by integrating a directly competitive product. The firm has a Buy rating and $200 price target on shares of Google parent Alphabet.

INCREMENTALLY POSITIVE: JPMorgan came away from Google I/O “incrementally positive.” Google is leading in many areas of artificial intelligence with Gemini “at the top of foundational model leaderboards,” the firm tells investors in a research note. Importantly, Google’s product innovation is accelerating and AI Mode in search is rolling out to U.S. users just one year after AI Overviews were introduced, JPMorgan points out. It is now more confident that Google can successfully navigate the shift to AI search. The firm reiterates an Overweight rating on Google parent Alphabet with a $195 price target.

LEVERAGING LEADING USER BASES: Morgan Stanley notes Google announced in its I/O keynote that AI Mode, its advanced reasoning offering, is now available to all of Google’s U.S. users and that it is also expanding the capabilities of AI Mode with more agentic commercial experiences for users over the course of 2025. The firm believes the value of scaled first party data and distribution is “higher than ever” and argues that the I/O event showcased how the company intends to leverage its leading user bases and distribution to drive next generation more personalized “search” and agentic experiences. Next gen tools are improving too, but for now the firm is “most optimistic on the free pipeline of products to come” and it maintains an Overweight rating and $185 price target on shares of Google parent Alphabet.

AI PUSH INTO CORE SEARCH: Discussing the event, Wells Fargo said in a research note to investors that AI Mode launch in the U.S. reinforces view that Google will move more aggressively to push AI into core search. The firm sees full integration of AI Mode in the main search bar within 3-6 months, meeting rapidly evolving consumer demand. Furthermore, Wells expects disruption ahead. The firm has an Equal Weight rating on Alphabet’s shares with a price target of $175. 

DREAM SCENARIO: Loop Capital keeps a Buy rating and $27 price target on Warby Parker, while calling the company’s Google smartglasses partnership a “dream scenario.” The firm is “ecstatic” that Warby Parker will be able to fund smartglasses development on “someone else’s dime” and expects smartglasses growth to be exponential over the next few years. Google’s $75M investment is also a significant vote of confidence in Warby Parker’s long-term growth prospects, Loop added.

PRICE ACTION: Shares of Alphabet are trading up by over 5% on Wednesday at $172.80, while Warby Parker has added about 2% to yesterday’s gains, trading at $20.83.