Why Googles AI Is Winning The Search War
Analyst Upgrades Alphabet on AI Optimism
In a significant vote of confidence for Google's future, Citizens JMP analyst Andrew Boone has upgraded Alphabet (GOOGL/GOOG) from Market Perform to Market Outperform, setting a new price forecast of $220. The upgrade is rooted in the belief that Artificial Intelligence will ultimately serve as a major growth driver for the tech giant.
According to Boone, concerns that competing platforms like ChatGPT would divert a significant number of search queries away from Google have not materialized in a way that would materially impact the company's results. On the contrary, AI is seen as a tool that expands Google's own opportunities by enabling it to answer a wider range of user questions and better understand user intent for improved monetization.
AI Overviews: Google's Growth Engine
A key component of this optimistic outlook is Google's AI Overviews, which became widely available in the U.S. in May 2025. This feature has already shown impressive results, demonstrating a 10% query growth during its testing phase. Projections indicate a massive expansion for AI Overviews, growing from an estimated 1.5 billion monthly users in the first quarter of 2025 to 4 billion by the third quarter. The analyst anticipates it will eventually handle about two-thirds of all search queries by the following quarter.
If Google can sustain this 10% query growth as its AI delivers more comprehensive answers, it could translate to a mid-single-digit tailwind for overall query growth in the latter half of 2025.
Putting the ChatGPT Threat in Perspective
While ChatGPT certainly offsets some of this growth, its scale is put into perspective by Boone's analysis. Based on OpenAI's reported $10 billion Annual Recurring Revenue (ARR) as of June 2025, its subscriber base is estimated to be around 20 million. In contrast, Google reports over 5 billion active users.
The analysis suggests that while dedicated ChatGPT subscribers may reduce their Google usage, the broad distribution of AI Overviews will accelerate Google's overall query growth. In essence, AI is expanding the entire search market faster than ChatGPT is capturing market share from Google.
Monetizing Search Intent Beyond Keywords
Beyond simply increasing user queries, AI is also set to enhance how Google monetizes search. Boone highlights Google's Smart Bidding Exploration and AI Max for Search Campaigns as pivotal tools. These advancements allow advertisers to target the intent behind a user's query rather than just bidding on specific keywords. This shift could enable Google to commercialize a much larger portion of searches, well beyond the historical ~20% that were considered monetizable. This strategy is central to Wall Street's view on Google's AI-driven future.
Updated Financials and Antitrust Outlook
This confidence in query growth and enhanced monetization has led Boone to revise his financial forecasts for Alphabet. For the second quarter of 2025, the revenue forecast has been increased to $79.9 billion (from $78.9 billion), with the EPS forecast rising to $2.16 (from $2.11).
This upgrade also marks a shift in perspective on a previous headwind: potential antitrust penalties. The analyst had previously downgraded Google over the risk that a court might block Google's substantial payments to Apple Inc. for being the default search engine on its devices. However, Boone now suggests that this risk has been largely priced into the stock, as shares are trading lower than at the time of the January downgrade. This assessment prompted the decision to upgrade the shares ahead of the court's final ruling. This focus on AI is also reflected in the company's recent strategic moves, such as hiring a former Oracle CFO to bolster its Google Cloud division.
