MW Has Google lost its AI edge? How its 'unexciting' strategy could actually pay off.
By Christine Ji
Critics worry Google is losing ground to flashier rivals, but rapid Gemini adoption and AI-native integrations are driving monetization behind the scenes
Google's Gemini has surged to 900 million monthly active users, more than doubling its footprint over the past year.
Google Gemini spent the past year clawing its way to a seat at the table alongside OpenAI and Anthropic, but its cutting-edge reputation is facing challenges today.
Tuesday's Google I/O developer conference failed to pack the sizzle that some investors were hoping for. The company unveiled a slew of artificial-intelligence updates, such as the Gemini 3.5 family of models, the AI agent Gemini Spark and an AI-infused Google search, but shares of Alphabet $(GOOGL)$ $(GOOG)$ closed 2% lower following the event. Shares slipped again Wednesday.
Radio Free Mobile founder Richard Windsor called the updates "solid, if unexciting" in a Wednesday note, adding that these updates are more "about keeping Anthropic out of its territory...and cementing its grip on the consumer AI ecosystem before OpenAI can get a foothold" than pushing flashy breakthroughs. The I/O event was "almost entirely commercially driven," according to Windsor.
But for many analysts on Wall Street, leaning into "unexciting" applications across its numerous business surfaces might just be Google's superpower, providing a much-needed monetization outlet to justify the exorbitant costs of developing the technology. Google is slated to spend up to $190 billion in 2026 alone for its AI ambitions.
Read: Why Alphabet's stock is the standout gainer on Big Tech's monster earnings day
According to a Wednesday note from Mizuho managing director Daniel O'Regan, "Google is still thought of as being in the frontier of AI-model technology, but the perception of Gemini has fallen behind ChatGPT and Claude."
Fueling this narrative is a recent report from Bloomberg News claiming that Google's AI researchers are facing an internal computing crunch as they compete with external cloud customers like Anthropic and Meta Platforms (META) for resources.
"We have a rigorous, ongoing process that ensures our compute resources are allocated to the most important priorities, balancing today's customer and user needs along with our long-term investments to advance research and innovation," Google said in a statement.
Underscoring the company's commitment to research, a Google spokesperson highlighted Tuesday's debut of the multimodal Gemini Omni model and a suite of new AI tools for the scientific community.
Still, bullish Alphabet investors are focusing on the company's custom-chip business and Google Cloud growth over pure AI research, O'Regan said. Google Cloud posted an impressive 63% year-over-year revenue increase last quarter, and shows no sign of stopping, with a whopping $462 billion in backlog.
Additionally, Google search emerged as one of the bigger focuses of the I/O. It's a sign that Google is getting serious about using AI to turbocharge growth across its entire business.
Google is working to establish search as the entry point to its AI features, and users can now interact with multimodal inputs and AI-powered suggestions to refine their queries. Search agents can continuously monitor information across different categories and alert users of updates.
Bank of America analyst Justin Post pointed out in a Wednesday note that Gemini's rapid adoption is a signal of Google's successful transition toward "AI-native experiences" that allow users to frictionlessly add AI to their existing workflows. Google said Gemini has reached 900 million monthly active users, over double from 400 million a year ago.
Google's announcements on Tuesday also emphasized the rollout of consumer AI agents through Gemini Spark, which can interact seamlessly across the entire Google ecosystem of Gmail, Drive, Calendar, Chrome and third-party applications.
It still remains to be seen if AI queries can be monetized to a greater degree than traditional search, but "we think deeper AI interactions with more ad space can drive better monetization of informational queries, driving continued search revenue strength," Post wrote.
-Christine Ji
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(END) Dow Jones Newswires
May 20, 2026 15:20 ET (19:20 GMT)
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