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What Happened?
Shares of online advertising giant Alphabet (NASDAQ:GOOGL) jumped 5.2% in the afternoon session after the company rolled out new AI tools at its annual I/O show, which was well received by Wall Street as it laid out a detailed plan to maintain its dominance in the web search market.
The announcement also appeared well-timed, given recent concerns some internet users were leaning more on LLMs like ChatGPT as their default search product. What really stood out during the show was "AI Mode," which is like a chat bot baked into Google's search engine. This feature makes it faster for users to access Google's AI search feature, and was rolled out immediately to US users.
But it wasn't just about search. Google also threw out a bunch of shiny new AI toys. These include Google Beam (a new video chat platform built from the ground up with AI). Then there's a collaboration with Warby Parker to launch AI-powered smart glasses running on Google's Android XR. And for content creators, they teased Veo 3, their next-gen AI video generator.
In terms of monetization, Google announced a new 'AI Ultra' subscription plan that could fetch up to $249.99 per month, which shows it is heavily invested in enterprises and high-end users who tend to have staying power and could make the products catch on faster.
Citi analyst Ronald Josey with a Buy rating and $200 price target summed up the Street's sentiment, adding "With AI Mode going live in the U.S., the Gemini App reaching 400M MAUs [monthly active users] (vs. ~350M in March), and AI Overviews delivering query growth, we believe GOOGL's product cadence and user adoption of newer tools is ramping which should provide some stability for Search growth."
Overall, the announcements indicate Alphabet is not just keeping up in the AI race but is better positioned in the fast-evolving market.
The shares closed the day at $168.56, up 2.8% from previous close.
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What The Market Is Telling Us
Alphabet’s shares are extremely volatile and have had 38 moves greater than 2.5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was about 1 month ago when the stock dropped 3.2% as stocks grappled with more uncertainty as President Trump criticized the Federal Reserve's approach to interest rate cuts, warning that the pace was slow and could hinder economic growth. Trump's comments added pressure to an already sensitive market, raising concerns about political interference in monetary policy.