Alphabet's Class A shares closed down 0.4% at $387.66 on Thursday, after the company unveiled a suite of new artificial intelligence features at its annual I/O developer conference and simultaneously confronted a fresh regulatory challenge in Europe. The stock traded in a range of $383.13 to $392.46 during the session, while Class C shares fell a similar 0.4% to $383.47.
During the I/O event, Google placed AI at the center of its core business strategy, announcing new AI agents for Search, coding tools, and subscription tiers. CEO Sundar Pichai emphasized that the company's AI-powered features are driving increased usage of Search. The company reported that its AI Mode in Search has surpassed 1 billion monthly users and is rolling out Gemini 3.5 Flash as the default global model. Later this summer, Google plans to launch information agents in Search, initially available to subscribers of Google AI Pro and Ultra plans. The Universal Cart feature will go live across Search and the Gemini app, with expansion to YouTube and Gmail planned.
To bolster its competitive position against rivals, Google reduced the price of its top-tier AI Ultra plan from $250 to $200 per month and introduced a new $100 monthly subscription aimed at developers, technical leads, and advanced creators. The company is clearly looking to secure its search dominance while pushing deeper into the AI market.
Alphabet's financial performance remains robust, with total revenue rising 22% to $109.9 billion in the latest quarter. Google Cloud revenue surged 63% to $20 billion, which Pichai described as the "primary growth driver for cloud." However, the company's ambitious AI push comes with substantial costs. Alphabet expects capital expenditure between $180 billion and $190 billion this year, a figure that underscores the massive investment required to compete in the AI arms race.
The competitive landscape is intensifying, particularly with Nvidia. Alphabet has begun selling its own tensor processing units (TPUs) to select customers, marking a strategic shift as it builds out its proprietary AI stack. While Nvidia remains the world's most valuable company, Alphabet has narrowed the gap, making the chip competition a key narrative for both the stock market and technology products.
The broader market provided little tailwind for Alphabet. The Nasdaq Composite edged up 0.09%, while Nvidia shares slipped 1.8% post-earnings as profit-taking set in and traders weighed the implications of emerging chip competition. Wall Street's main indexes ticked slightly higher, but the gains were modest.
On the regulatory front, consumer groups in Europe filed complaints against Google, Meta Platforms, and TikTok on Thursday, alleging that the platforms have failed to protect users from scam ads as required by the Digital Services Act. The groups claim the companies "do little when being notified" of financial scam advertisements. Google responded, stating that it blocks over 99% of ads that violate its rules before they reach users.
The regulatory risk adds another layer of uncertainty for Alphabet. Under the Digital Services Act, fines can reach up to 6% of global turnover. Meanwhile, broader market data from Goldman Sachs indicates that S&P 500 capital spending is projected to jump 33% in 2026, while buybacks are expected to rise only 3%, highlighting the cash pressures facing Big Tech.
Investors are watching closely for evidence that the rollout of Gemini across core products can support Alphabet's nearly $4.7 trillion market valuation. The company continues to expand Gemini's user base, but the massive spending required means that the market is waiting for clearer signs of growth before deciding the next chapter of the story.
