Alphabet (GOOGL) Looks to Checkmate OpenAI With AI Search Strategy
As an investor in Alphabet (GOOGL), I've noticed the growing narrative: that Google is in 'managed decline,' threatened by OpenAI's rapid rise with ChatGPT. This perspective, popularized across podcasts and media, paints Alphabet as bloated, slow, and vulnerable to being overtaken. However, I believe these claims are premature.
Confident Investing Starts Here:
Rather than merely facing competition, Alphabet is quietly evolving its Search business with Gemini AI. Far from declining, the company appears to be strengthening its competitive edge, positioning itself for sustained growth and long-term outperformance.
Google's Gemini Is Far More than a Clone
Alphabet has launched the Search Generative Experience (SGE), an AI-powered update to incorporate directly into traditional Search results. Unlike ChatGPT, which runs independently from typical Search behavior, the Gemini-driven SGE is seamlessly integrated into the conventional Search page we've all known for decades.
In Alphabet's latest quarterly update for Fiscal 2025, SGE already has over 1.5 billion active users each month, which serves as evidence of extremely rapid adoption. It's clear to me that Alphabet understands its users well: instead of fully reinventing the Search experience, they have enhanced it, drawing from decades of user experience and data. This hybrid version deepens user trust, providing an engaging user experience while limiting incentives for users to migrate to competing products and services.
Gemini Doesn't Just Maintain Revenue, It Increases It
Another significant aspect of Google's Gemini integration is the clear presence of monetization. Alphabet purposely kept advertising in the mix of SGE. Right in the AI-generated Search responses, you get relevant sponsored responses and product placements. This keeps Google's precious ad chassis model intact without breaking income from it. For instance, searching for 'best running headphones' features prominently sponsored product recommendations and advertisements.
The most recent reports from Alphabet show near-double-digit year-over-year increases in Search ad revenue, confirming that this monetization strategy works well for Alphabet. Gemini increases the user's Search experience, verifying this monetization strategy without detracting from the core Alphabet revenue stream. Therefore, it not only maintains Google's current cash flow but also potentially opens up additional opportunities for highly targeted advertising, solidifying Alphabet's lead.
Why OpenAI May Face Problems Competing Long-Term
OpenAI, while exciting to the market with AI-driven Search via ChatGPT, will face more significant structural limitations compared to Alphabet. It seems that most of the monetization OpenAI will do revolves around subscriptions or application fees, which is far less lucrative, sticky, and sustainable than Alphabet's ad revenue model. This will potentially be a long-term competitive disadvantage for OpenAI when competing with Alphabet, which is underpinned by deeper financial capital and infrastructure.
That said, I do think there is enough room for many successful players in this industry. OpenAI's models shouldn't be underestimated, and it is currently the market-leading company for generative AI. The field is still open to play for, and I see many dominant companies winning big, with both Google and OpenAI claiming the limelight similarly.
Margins Under Fire Shouldn't Deter GOOGL Investors
That said, Alphabet faces significant challenges in managing the substantial costs associated with operating the computing infrastructure necessary for Gemini. AI-powered Search is likely to be significantly more expensive than traditional search, which could put long-term pressure on profit margins. To mitigate this, Alphabet must continue diversifying its revenue streams. Waymo, part of the 'Other Bets' segment, offers one promising avenue. Its autonomous ride-hailing service is already operational in parts of the U.S., though it faces steep competition from Tesla's (TSLA) emerging autonomy network.
There's also uncertainty around user behavior. As AI tools—including Google's own subscription-based chatbots—gain traction, they could begin to siphon traffic away from traditional Search. This shift could reduce ad-driven revenue and lead to further margin pressure, potentially forcing Alphabet to lean more heavily on subscription-based models similar to ChatGPT. As a result, some degree of valuation multiple compression may be warranted over the longer term.
Still, these risks seem manageable when viewed in light of Alphabet's strong history of adapting its business model to generate durable long-term returns as markets evolve.
Is GOOGL a Buy, Sell, or Hold?
On Wall Street, GOOGL has a consensus Strong Buy rating, based on 29 Buys, nine Holds, and zero Sells over the past three months. The average GOOGL price target is $199.14, indicating a 15% upside potential over the next 12 months.
Alphabet's Moat Isn't Shrinking, It's Evolving
The narrative that Alphabet is in 'managed decline' strikes me as an overblown reaction to broader shifts in the tech landscape. In truth, Alphabet is actively leveraging its vast distribution network, proprietary data assets, and mature monetization infrastructure to carve out a defensible position in the evolving AI ecosystem.
Rather than showing signs of weakness, Alphabet is executing a strategic evolution—methodically and without premature fanfare. For long-term growth investors seeking both innovation and resilience, Gemini is a strong indicator that Alphabet remains a formidable force. It's not just keeping pace with change; it's positioning itself to deliver sustained, high-quality alpha in a rapidly transforming market.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
an hour ago
- Yahoo
AI chatbots and TikTok reshape how young people get their daily news
Artificial intelligence is changing the way people get their news, with more readers turning to chatbots like ChatGPT to stay up to date. At the same time, nearly half of young adults now rely on platforms such as TikTok as their main source of news. The findings come from the Reuters Institute's annual Digital News Report, released this week. The Oxford University-affiliated study surveyed nearly 97,000 people across 48 countries to track how global news habits are shifting. The study found that a notable number of people are using AI chatbots to read headlines and get news updates – a shift described by the institute's director Mitali Mukherjee as a 'new chapter' in the way audiences consume information. While only 7 percent overall say they use AI chatbots to find news, that number rises among younger audiences – 12 percent of under-35s and 15 percent of under-25s now rely on tools such as OpenAI's ChatGPT, Google's Gemini or Meta's Llama for their news. 'Personalised, bite-sized and quick – that's how younger audiences want their news, and AI tools are stepping in to deliver exactly that,' Mukherjee noted. Beyond reading headlines, many readers are turning to AI for more complex tasks: 27 percent use it to summarise news articles, 24 percent for translations, and 21 percent for recommendations on what to read next. Nearly one in five have quizzed AI directly about current events. (with newswires) Read more on RFI EnglishRead also:AI steals spotlight from Nobel winners who highlight Its power and risksAI showcase pays off for France, but US tech scepticism endures'By humans, for humans': French dubbing industry speaks out against AI threat
Android Authority
2 hours ago
- Android Authority
I tested Gemini's latest image generator and here are the results
Back in November, I tested the image generation capabilities within Google's Gemini, which was powered by the Imagen 3 model. While I liked it, I ran into its limitations pretty quickly. Google recently rolled out its successor — Imagen 4 — and I've been putting it through its paces over the last couple of weeks. I think the new version is definitely an improvement, as some of the issues I had with Imagen 3 are now thankfully gone. But some frustrations still remain, meaning the new version isn't quite as good as I'd like. How often do you create images with AI? 0 votes It's a daily thing for me. NaN % Maybe once per week. NaN % A few times per month. NaN % Never. NaN % So, what has improved? The quality of the images produced has generally improved, though the improvement isn't massive. Imagen 3 was already generally good at creating images of people, animals, and scenery, but the new version consistently produces sharper, more detailed images. When it comes to generating images of people — which is only possible with Gemini Advanced — I had persistent issues with Imagen 3 where it would create cartoonish-looking photos, even when I wasn't asking for that specific style. Prompting it to change the image to something more realistic was often a losing battle. I haven't experienced any of that with Imagen 4. All the images of people it generates look very professional — perhaps a bit too much, which is something we'll touch on later. One of my biggest frustrations with the older model was the limited control over aspect ratios. I often felt stuck with 1:1 square images, which severely limited their use case. I couldn't use them for online publications, and printing them for a standard photo frame was out of the question. While Imagen 4 still defaults to a 1:1 ratio, I can now simply prompt it to use a different one, like 16:9, 9:16, or 4:3. This is the feature I've been waiting for, as it makes the images created far more versatile and usable. Imagen 4 also works a lot more smoothly. While I haven't found it to be noticeably faster — although a faster model is reportedly in the works — there are far fewer errors. With the previous version, Gemini would sometimes show an error message, saying it couldn't produce an image for an unknown reason. I have received none of those with Imagen 4. It just works. Still looks a bit too retouched While Imagen 4 produces better images, is more reliable, and allows for different aspect ratios, some of the issues I encountered when testing its predecessor are still present. My main problem is that the images often aren't as realistic as I'd like, especially when creating close-ups of people and animals. Images tend to come out quite saturated, and many feature a prominent bokeh effect that professionally blurs the background. They all look like they were taken by a photographer with 15 years of experience instead of by me, just pointing a camera at my cat and pressing the shutter. Sure, they look nice, but a 'casual mode' would be a fantastic addition — something more realistic, where the lighting isn't perfect and the subject isn't posing like a model. I prompted Gemini to make an image more realistic by removing the bokeh effect and generally making it less perfect. The AI did try, but after prompting it three or four times on the same image, it seemed to reach its limit and said it couldn't do any better. Each new image it produced was a bit more casual, but it was still quite polished, clearly hinting that it was AI-generated. You can see that in the images above, going from left to right. The first one includes a strong bokeh effect, and the man has very clear skin, while the other two progress to the man looking older and older, as well as more tired. He even started balding a bit in the last image. It's not what I really meant when prompting Gemini to make the image more realistic, although it does come out more casual. Imagen 4 does a much better job with random images like landscapes and city skylines. These images, taken from afar, don't include as many close-up details, so they look more genuine. Still, it can be a hit or miss. An image of the Sydney Opera House looks great, although the saturation is bumped up quite a bit — the grass is extra green, and the water is a picture-perfect blue. But when I asked for a picture of the Grand Canyon, it came out looking completely artificial and wouldn't fool anyone into thinking it was a real photo. It did perform better after a few retries, though. Editing is better, but not quite there One of my gripes with the previous version was its clumsy editing. When asked to change something minor — like the color of a hat — the AI would do it, but it would also generate a brand new, completely different image. The ideal scenario would be to create an image and then be allowed to edit every detail precisely, such as changing a piece of clothing, adding a specific item, or altering the weather conditions while leaving everything else exactly as is. Imagen 4 is better in this regard, but not by much. When I prompted it to change the color of a jacket to blue, it created a new image. However, by specifically asking it to keep all other details the same, it managed to maintain a lot of the scenery and subject from the original. That's what happened in the examples above. The woman in the third image was the same, and she appeared to be in a similar room, but her pose and the camera angle were different, making it more of a re-shoot than an edit. Here's another example of a cat eating a popsicle. I prompted Gemini to change the color of the popsicle, and it did, and it kept a lot of the details. The cat's the same, and so is most of the background. But the cat's ears are now sticking out, and the hat is a bit different. Still, a good try. Despite its shortcomings, Imagen 4 is a great tool Even with its issues and a long wishlist of missing functionality, Imagen 4 is still among the best AI image generators available. Most of the problems I've mentioned are also present in other AI image-generation software, so it's not as if Gemini is behind the competition. It seems there are significant technical hurdles that need to be overcome before these types of tools can reach the next level of precision and realism. Other limitations are still in place, such as the inability to create images of famous people or generate content that violates Google's safety guidelines. Whether that's a good or a bad thing is a matter of opinion. For users seeking fewer restrictions, there are alternatives like Grok. Have you tried out the latest image generation in Gemini? Let me know your thoughts in the comments.
Yahoo
3 hours ago
- Yahoo
AI chatbots and TikTok reshape how young people get their daily news
Artificial intelligence is changing the way people get their news, with more readers turning to chatbots like ChatGPT to stay up to date. At the same time, nearly half of young adults now rely on platforms such as TikTok as their main source of news. The findings come from the Reuters Institute's annual Digital News Report, released this week. The Oxford University-affiliated study surveyed nearly 97,000 people across 48 countries to track how global news habits are shifting. The study found that a notable number of people are using AI chatbots to read headlines and get news updates – a shift described by the institute's director Mitali Mukherjee as a 'new chapter' in the way audiences consume information. While only 7 percent overall say they use AI chatbots to find news, that number rises among younger audiences – 12 percent of under-35s and 15 percent of under-25s now rely on tools such as OpenAI's ChatGPT, Google's Gemini or Meta's Llama for their news. 'Personalised, bite-sized and quick – that's how younger audiences want their news, and AI tools are stepping in to deliver exactly that,' Mukherjee noted. Beyond reading headlines, many readers are turning to AI for more complex tasks: 27 percent use it to summarise news articles, 24 percent for translations, and 21 percent for recommendations on what to read next. Nearly one in five have quizzed AI directly about current events. (with newswires) Read more on RFI EnglishRead also:AI steals spotlight from Nobel winners who highlight Its power and risksAI showcase pays off for France, but US tech scepticism endures'By humans, for humans': French dubbing industry speaks out against AI threat
