AI Takes Over Search: Is Google's Dominance At Risk?

Key Points

• Alphabet stock is in bear market territory, now down close to 28% from its 52-week high.
• AI chatbots like ChatGPT and Grok are disrupting how users search for information, posing a long-term threat to Google’s ad-driven search business.
• Despite challenges, Alphabet still leads with 88% U.S. search market share and doubles down on AI, committing $75 billion in CapEx.

Shares of Alphabet NASDAQ: GOOGL are under pressure, tumbling alongside the broader U.S. market after President Trump’s sweeping tariff announcement sparked a fresh wave of risk-off sentiment.

As of market close on April 3, Alphabet stock is down over 20% year-to-date and about 28% below its 52-week high, officially putting it in bear market territory.

But tariffs aren’t the only concern.

While the broader tech sell-off explains part of the decline, Alphabet faces another pressing challenge: intensifying competition from generative artificial intelligence (AI) services like OpenAI’s ChatGPT, Elon Musk’s Grok, and others that are reshaping how people search for information.

The question investors are asking themselves now is: Will these tools pose a serious long-term threat to Alphabet’s core business of ad-driven search?

The Rise of ChatGPT and AI-Powered Search

ChatGPT, developed by OpenAI, exploded onto the scene in late 2022 and quickly became a cultural phenomenon.

Its ability to generate coherent, human-like responses to virtually any query sparked excitement across industries. ChatGPT's success inspired a wave of competitors—Anthropic’s Claude, Google’s own Bard (now Gemini), and XAI’s Grok—each racing to offer smarter, more intuitive conversational AI experiences.

Millions of daily users now use these tools for quick, personalized answers. For many, especially younger users, AI chatbots offer a more straightforward and engaging alternative to traditional search engines, enabling them to ask questions as they would text a friend and receive direct, conversational responses within seconds.

This fundamental shift in user behavior marks a serious challenge for Google’s longstanding search model, which relies on link-based results and advertising revenue. As more people opt for AI-generated answers over scrolling through web pages, the potential for disruption grows.

A Generational Shift Away from Google?

For Gen Z and Millennials, AI chatbots like ChatGPT are quickly becoming the preferred way to access information. 

Where Google once reigned supreme, a new generation is increasingly seeking speed and convenience over pages of links and ads.

That’s where Alphabet faces a central inflection point: Can it maintain its grip on the search market as the definition of “search” changes? And if users begin to skip Google altogether in favor of AI tools, what happens to the company’s core advertising engine?

Google Still Leads, But for How Long?

Despite the AI boom, Google remains the dominant search engine. According to recent estimates, it still commands around 88% of the U.S. search engine market share. In Q4 2024, Alphabet reported $54 billion in its Search and Other revenue sector, up 12.5% year-over-year, thanks partly to AI features like its new AI Overviews.

These AI Overviews are now live in over 100 countries and aim to keep users within Google’s ecosystem by delivering AI-generated summaries alongside traditional search results. However, early reports suggest mixed results. 

While engagement remains strong, some data shows an 8.9% decline in website clicks, raising concerns that AI-enhanced search may reduce traffic to external sites.

Nonetheless, Alphabet maintains that AI Overviews are increasing engagement within search, not cannibalizing it. CEO Sundar Pichai has insisted that the new experience drives stronger usage and adapts to changing user behavior.

Alphabet’s $75B Bet on AI Dominance

Google isn’t sitting idly by. In its Q4 earnings call, Alphabet revealed an aggressive $75 billion capital expenditure plan for 2025—a 43% increase—from the previous year, focused on scaling its AI and cloud infrastructure. This includes ramping up development on its Gemini AI models and continuing to invest in advanced data centers and hardware.

The goal is to ensure Google's continued competitiveness in an AI-first world by embedding powerful generative tools into its existing products and services.

Can Alphabet Defend Its Search Empire?

Alphabet may be facing one of the biggest challenges in its history as generative AI reshapes how people find information online.

While it still holds a dominant position in search and invests heavily to stay ahead, rising competition and shifting user preferences pose a legitimate threat to its long-term dominance.

Whether Gemini and AI Overviews can keep users in Google’s orbit remains a critical question for investors in 2025 and beyond.