*

Google's AI investment aims to counter competition,

maintain

search dominance

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Analysts predict Google's search market share may drop

below 50%

in five years

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Google One subscription service grows with AI-enhanced

offerings

By Kenrick Cai

MOUNTAIN VIEW, California, May 20 (Reuters) - Alphabet's

Google kicks off its annual developer conference on

Tuesday with a flurry of announcements showcasing its huge

investment in artificial intelligence, while seeking to fend off

concerns over the future of its business.

The I/O conference in Mountain View, California has adopted

a tone of increased urgency since the rise of generative AI

posed a fresh threat to Google's long-time stronghold organizing

and retrieving information on the internet.

In recent months, Google has become more aggressive in

asserting it has caught up to competitors after appearing

flat-footed upon the release of Microsoft ( MSFT )-backed

OpenAI's ChatGPT.

Top executives including CEO Sundar Pichai have often cited

the pole position of its Gemini class of AI models on public

leaderboards, ahead of top models from competitors including

OpenAI and Meta.

Now, with consumer usage of AI chatbots maturing, investors

will be tracking how aggressive Google is in disrupting its

search advertising business line, which accounted for the

majority of the company's $350 billion in 2024 revenue.

Earlier this month, Alphabet stock lost $150 billion in

market value in one day after an Apple ( AAPL ) executive

testified during one of Google's antitrust cases that AI

offerings had caused a decline in searches on Apple's ( AAPL ) Safari web

browser for the first time.

In turn, some analysts reassessed how to measure Google's

dominant search market share, which has for years hovered around

90% by traditional metrics.

A Bernstein analyst note this month placed the figure at 65%

to 70% when accounting for usage of AI chatbots. Wells Fargo

analysts estimated that Google's market share could fall to less

than 50% in five years.

The analysts pointed to a behavioral shift drawing consumers

towards AI chatbots where they once used traditional search

engines.

Google's market position could be further rocked by the

outcome of legal challenges, in particular a pair of antitrust

cases brought by the Justice Department, which is seeking the

forced sale of parts of the tech giant including its Chrome

browser.

Investment in AI accounts for most of Alphabet's $75 billion

in forecasted capital expenditures this year, a dramatic uptick

from the $52.5 billion in 2024 spending that the company

reported. In April, CEO Sundar Pichai reiterated those spending

plans despite market uncertainty around tariffs.

Google has injected more AI into its core search engine over

the past two years, primarily through AI Overviews, generative

AI summaries that are increasingly appearing atop the

traditional hyperlinks to relevant webpages, and AI Mode, an

experimental version that leverages AI more intensively to

answer complex queries.

Tuesday's announcements will likely include further updates

to search as well as Google's effort to deliver a "universal AI

agent."

At last year's conference, the company teased Project Astra,

a prototype tool that can talk to users about anything captured

on their smartphone camera in real time.

The company began experimenting with inserting ads into AI

Overviews last May, though it has avoided any radical changes

that would rock the boat.

Meanwhile, Google is growing other revenue streams to

monetize AI. Last week, the company told Reuters its Google One

consumer subscription service had crossed 150 million

subscribers helped by "millions" of customers who signed up for

a $19.99 per month plan with access to AI capabilities

unavailable for most free users.