Google Flexes Its AI Muscles

In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Travis Hoium, Lou Whiteman, and Rachel Warren discuss:

• Google I/O
• Is this AI for normies?
• Downstream impacts for investors.

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A full transcript is below.

This podcast was recorded on May 20, 2026.

Travis Hoium: Is Google back in the AI lead? Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I'm Travis Hoium, joined today by Rachel Warren and Lou Whiteman, and guys, the big news yesterday, in the market and the technology was Google had their I/O event. Lou, I'm sure you watched the whole thing, didn't you?

Lou Whiteman: I/O.

Travis Hoium: This was a very interesting presentation. They announced a whole bunch of different things, throwing spaghetti at the wall. That said, it seems like they are pushing forward with their really good models, depending on who you are, and then also changing their products a little bit. We thought, or a lot of people thought a few years ago, hey, 10 Bulinks are gonna be dead. Google's in real trouble. Now we're seeing some updates to Google itself, the Google website that's going to incorporate some of these AI tools. Their Flash 3.5 model is getting really good reviews. As long as you aren't a coder, we'll maybe talk about that in a moment. But when you looked at this, it seems they're playing a card that nobody else can play with their vertically integrated stack, with their consumer focus. Sure, they're not going to win where Anthropic is, but their prize may be even bigger in the end. Is that the right way to think about it?

Lou Whiteman: From the top, we need to do a disclaimer here. These events are designed to impress. Maybe with the notable exception, if you're an investor, you should mostly ignore these. That day when Steve Jobs stood up on stage and said, We invented the iPhone. That day, you probably as an investor should have listened, but for the most part, investing off of these events and taking this as gospel: bad idea. It doesn't mean it's not worth talking about. It does show where they're going. But we shouldn't take any of these product demos or announcements too seriously. If announcements were product successes, we'd all be at parties with Bella Ramsey right now, knowing who we're at the party with because of Siri. That commercial, I don't think that has aged well at all, relative to reality. They're not the only one. But if anything, I don't know. My takeaway here is, I think what you said is right. Of all the AI companies we talk about, Alphabet is the one with the most ways to win. Truth be told, we don't know what AI will look like in five years. We don't know whose next model is the best model. We don't know how much consumers or enterprises, they're going to be using AI. We don't know to what extent or how. The one with the most, I guess, irons in the fire and the most ways to win is probably the one that should be the most attractive to us. I think Google, if nothing else, at this event, made the case that they have a lot of irons in the fire and win.

Travis Hoium: Rachel, one of the things that stuck out to me is that they seem to be looking at artificial intelligence kind of differently than a lot of these other companies. You've Anthropic has always been focused on coding. That was always their secret sauce. OpenAI has kind of been forced to move in that direction because that's where the money is. So they're following Anthropic towards that pile of money, and they're, by the way, losing market share in ChatGPT to Gemini, who now has over one billion monthly users or nine hundred million monthly active users, over one billion using the AI mode and search. But it seems like one of the takeaways is that their world models, omni is what they talked about. I don't think we can try that one yet. But they're trying to build this world where you can put anything in and then get anything out, which is very different than the other successful companies today. Is that the right strategy? We're not technology people, but it seems like the thing that I could see myself or my wife or even my kids using more than I could Anthropic to write code.

Rachel Warren: Do you think that that's the point? Much of what we have seen from that core business, the search business, it's consumer facing. I do think that is the driving nature behind a lot of these rollouts we're seeing. A lot of what we’ve talked about with AI and specifically with Alphabet’s approach has been sort of the smart chatbot, Gemini type of question in a box, get a response back. I want to talk about a few of the things that they introduced. I don't think this moves the needle right now, but I do think it speaks to their broader strategy. I think if you're an investor, you're interested in this business, it's important to understand where they're that Gemini Omni that you mentioned, it's this basically world model. It doesn't just look at text, it can look at video. I can listen to live audio. It can understand complex code all at the exact same time. The idea is that it can generate accurate, realistic content. It's even coming to YouTube shorts. The goal is to help creators edit their video. They paired this with their new Gemini 3.5 engine, which I think we'll talk about in a little bit. It starts with a 3.5 flash. Basically, it's supposed to process responses four times faster than prior frontier models.

They unveiled Gemini Spark. They are calling this a 24/7 personal AI agent. We've been talking a lot about the growth of agents and what that could mean for consumers and businesses alike. Unlike a chatbot that tells you how to do something, Spark actually does it for you. It connects to your Gmail, your Google Docs, about 30 different third-party apps like Adobe, Uber, Dropbox. You can imagine telling it to say, find a flight confirmation, your email. Check your calendar, calculate the driving distance, and so forth. Then the final thing is they gave their core search engine a major facelift, the biggest one in about 25 years because they have integrated all these models right into the daily queries. They actually added a feature called ask YouTube. I think a lot of this is superfacing. We’re going to have to see what the adoption looks like, but having so much of this built into these platforms that millions of people use every day, I think, is actually a really genius approach to Alphabet’s world of AI.

Travis Hoium: Lou, I want to end this segment on this. We're going to stick with Google I/O, and what the implications are in the next couple of segments. But we've been talking a lot and asking questions about what's the actual payoff from artificial intelligence, especially as these companies spend trillions of dollars to build out this AI infrastructure. One of the things that really stuck out to me is that Flash 3.5. The new model, you can actually use this today if you go into Gemini. You can use Flash 3.5. I've found it to be pretty useful, but it is significantly more expensive than previous models. Exact 22.5 times more costly on a per-token basis than Flash 2.0. We've heard a lot of these companies talk about we're compute-constrained, meaning demand is higher than supply. I have always wondered if demand is actually higher than supply, why aren't you raising your prices? Google actually did it. Is that a sign that we're moving to this, Hey, we need to actually make money on all this compute phase, or is this just, we don't necessarily want to be the anthropic of the world, but we want to get our pound to flashier.

Lou Whiteman: Maybe here's what strikes me about this, and we'll get into consumer versus Enterprise in a second. But I think that this shows maybe that just getting all of the consumers isn't the way to go. I think pushing towards profitability, we have to at some point. We don't need just profitability. Historically, these companies had double digit return on invested at the invested capital that they are putting into this project to get double-digit returns on that to get even, mid teens they've done before. Prices need to go significantly higher from here. I think that at least they are looking at that or experimenting with it, and I think it's probably safer to experiment with the consumer than it is right now, necessarily the enterprise. Maybe, I don't know, though, if we're at the verge of just the floodgates opening and prices really hitting reality now. I think it's going to be subsidized for a while longer.

Travis Hoium: Well, it'll be interesting to see what the economics for Google Cloud looks like next quarter, because those margins have been really, really good. They may even be going higher with this one. We'll see. Well, get to AI going mainstream in a little bit different way. In our next segment, you're listening to Motley Fool Hidden Gems investing.

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Travis Hoium: Welcome back to Motley Fool Hidden Gems Investing. I have a question about AI going mainstream. We see these stats about ChatGPT having so many hundreds of millions of users. If you're on Twitter, you can't go anywhere without anybody talking about how much they use AI. In the real world, I have a harder time believing that that's actually the way that people are using artificial intelligence. I always use my wife as a proxy. Not an early user of ChatGPT, but she suddenly saw, this AI mode shows up in Google, in Google search. That's how they've gotten to this point where I believe the number was over 1 billion monthly active users with AI mode. Another Rachel, you mentioned, they're moving more of these AI tools into search, the products that we already use, they have distribution with Chrome, they have Android. Rachel, is this the thing that will take AI to another level from those early adopters who were willing to download ChatGPT sign up for an account, and heaven forbid, maybe even pay for it to a world where it's just in the browser. We're just using it, and it just kind of slow it's a boiling frog of artificial intelligence. Five years from now, we're suddenly all using Google's products because they just folded into what we were already using.

Rachel Warren: I think that's the idea. I think it remains to be seen what that long term utility is, but I think that's where the success lies. If you're having these types of tools woven into the everyday experience for the consumer so that it becomes second nature, I think that becomes something where the runway to adoption is much more prolonged. I think if you think about it from the consumer perspective, the last few years, IOS felt a bit like a tech novelty. Maybe you had to go out of your way to open up a browser tab. I think Alphabet, what Google's trying to do is really bridge the gap between the tech enthusiasts, who have been talking about the utility with great excitement for a number of years now and everyone else. That's the key point. I think that idea that AI is shifting away from some of these complex prompts, morphing into a more seamless, invisible utility that helps people navigate daily life, I think we're getting there, but I think in the log tribute, it's still very, early days.

Lou Whiteman: Feels like we've been talking about AI's mainstream moment and whether or not this is it for a good year plus now. The funny thing is, is that on consumer side, it's not really like I have a choice. It's just showing up in my search results. Whether or not, I do think that's the best way to teach behavior. I think it is happening. But look, I go back to this. I don't know how much the consumer matters. There's implications of the future, which we'll get to. But right now, enterprise is where it's at to get that return on invested capital. Anthropic is showing that. It's important to remember, Alphabet, congrats for winning this, and it does look like you're winning this. But look, that is backfill for them. That's holding SERP. That's not growth, because they are the ones that were seen as vulnerable. Where the thesis has changed is it's not Alphabet will be destroyed by AI because SERP will be destroyed by AI. It's Alphabet can hold SERP, so yes, this is good. This is especially important for Alphabet, since they were the leaders in the clubhouse, so they need to retain. But I am hesitant to make too much of it just because I think this is just we're in a very long process of retraining the consumer, or maybe redefining the Internet and what the Internet is. The one with Chrome is winning. I don't know if that's a shock or really in bestvul.

Travis Hoium: I will note that on the coding side, which is where Anthropic has really gained market share and grown a ton over the past year, it does not appear that at least 3.5 flash is going to be taking market share from them anytime soon. That's been the early reaction. On other areas, it does seem like 3.5 has been a little bit better to quota tweet from Aaron Levie, who is the CEO of Box, Financial Services, significantly better, public sector, healthcare, and life sciences, 3.5 flash is significantly better than some of their older tools like Flash 3. It does seem like there's improvements, but not necessarily equally distributed in the world of AI. I want to also talk about something that I think was very interesting and they've been talking about for quite a while, which is hardware. Glasses is something that I think we're moving to a world where we can see that some sort of AI augmented reality glasses are the future of hardware. How long that adoption curve takes is maybe up for major debate. But Rachel, they did announce some partnerships with Gentle Monster and Warby Parker. Very interesting that Warby Parker's stock plummeted yesterday. Because a hi people were so unimpressed by these glasses. Those ads are glasses. To be honest, I feel like I could have designed those.

Rachel Warren: There was let's just say there was an instant wave of skepticism. I think, the Internet had a bit of a field day joking about the design. Also, anyone who remembers the Google Glass backlash of a decade ago, maybe you've got a right to be cynical. How do these things work? They basically embed these tiny low-power cameras into the frame. There's dual direction speakers into the arms of the glasses, and then there's this display on the lens. They don't actually do heavy computing. The idea is that it's going to stream a live video feed of whatever you're looking at via Bluetooth to your phone so that Gemini x is like a real world visual assistant. There's a lot of questions about the battery life, the frames overheating, the privacy nightmare, as well. I think there's a bit of design and social flaws, perhaps that still have to be explored. I don't think this is where we get the consumer on ramp to AI. I'm actually quite skeptical about this particular hardware edge. I guess we'll see what that looks like, though in the next couple of years.

Lou Whiteman: I am yet to be convinced we don't already have the AI device sitting in our pocket right now is the phone.

Travis Hoium: Again, Apple wins by default.

Lou Whiteman: Or the pixel. Look, I'm just going to be that guy and do this because I do think you ignore this until it works. If you go by what companies promised at I/O like events, we'd all be segueing to work on streets devoid of cars. We'd get our nutrition from Juiceo health presses instead of actually going to restaurants, and we'd be doing our work via the humane AI Pin. Remember that? Look, AI will cause hardware to evolve, but whether or not this is and maybe I'm just going to show my ignorance here. But here's my question on the glasses as someone who actually wears glasses. The Meta Ray-ban version 2, so the newest, they say battery life 4-8 hours. Now, I'm going to guess.

Well, from what I know about consumer tech, I'm guessing that it isn't the full eight hours after a few weeks. What do I do when I'm charging my glasses midday? Do I take a nap? Do I not see? I feel like there's some really fundamental questions.

Rachel Warren: [inaudible]

Lou Whiteman: Or do I have to buy two pairs of these glasses? I just feel like there is a long history of tech innovation and lives getting better for it. The iPhone, the things we do on our front here. There's also a long history of companies putting out products because they think they're cool and not actually thinking, wow, consumers will like this. I am still of the opinion that these glasses are more novelty than essential. Why do I need a device to reiterate what is on my phone and to reiterate what is on my watch, and I'm already paying for a watch to reiterate what is on my phone. I get that, it would be neat if I just saw directions as I walk through town instead of having to look down at my phone every five minutes to see the directions go through town. But we've got Weymo for that. I don't see the killer app here. I guess is the way to put it.

Travis Hoium: To your point, and I think this is why this is an interesting topic for investors, Silicon Valley has been promising the next big thing for a very, long time. I think even in a world of AI, we're seeing that the incumbent Google, who was supposed to be disrupted, is just going to continue being a strong company because they just do the boring stuff that people want to do. It's not the best chatbot. It's not the best at coding, but it is the thing that's in your browser and answers the questions that you need, and people are used to it. That's all most people most normies want out of their AI. Let's be clear. Look at the success of the iPhone, and you will understand why every other tech company would like to create the next iPhone. That doesn't mean it's necessarily going to happen, but there's a real reason that they are trying to do it. If they succeed, there's a real reason investors can benefit. But as an investor, again, I think it's worth waiting till you actually see some traction here because I don't know if there's a void that needs to be filled at this second.

Lou Whiteman: When we come back, we're going to get to some potential ancillary or downstream effects of Google's announcements. You're listening to Motley Fool and Gems Investing.

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Travis Hoium: Welcome back to Motley Fool Hidden Gems Investing. It seems like Google's hitting on all cylinders, at least on the consumer side. They've got their models doing well. TPUs are doing well. But Lou, I want to know about the other implications across a lot of these companies that are some of the biggest companies in the world, some of the biggest companies best performing stocks in the market, OpenAI, like is losing market share, which you mentioned, Invidia is growing, but also losing market share. That's just the reality if TPUs are growing this quickly. Do those trends get worse? Is there upside for companies like Broadcom, who's a partner? When you see growth at Google, some of these new products and the improvements with search, and maybe keeping the share that they have there, where does your head go from some of these other investments?

Lou Whiteman: The chip thing is fascinating because we had the servers IPO, too, and it does seem like it doesn't make sense that indefinitely everyone's an. Because we won't keep growing forever. Invidia is a winner. Google is a winner. This new company I don't understand that, but I'm not a chip person. I think probably truth is somewhere in the middle and there's market for all of these, but maybe not.

Travis Hoium: Isn't the possible impact, though, just margins go from, 80%-40%, which is you would be more historically.

Lou Whiteman: Yes, gangster capitalism is over. You can't just extract whatever toll you want for this. You actually have to compete. But look, these are the boring answers on losers, but I think there are a couple losers to look at. First of all, this has been true for a while. SEO focused content creators and maybe publishers in general, what Google is trying to do here is keep you in its ecosystem. Gone are the days that they linked you to other sites. The days of the Internet, some of the best sites on the Internet is those silly forums that allow you to just fix something that needs fixing or something, and it feels like that's all just going away. I'm a little sad about that.

Travis Hoium: It's on YouTube down, Lou?

Lou Whiteman: Well, it is, I guess. But look, Google is definitely their goal is to keep you there, and I don't think that's good for those who have built their business around getting those links. The other one, and this is probably too hot of a take. But should Amazon be worried about this? I mean, one thing we didn't talk about is the Universal cart.

Travis Hoium: The shopping. That's interesting.

Lou Whiteman: AI-driven shopping tools, it feels like, and this is a very oversimplistic. I don't know if they can do this, but it feels like Google is trying to take every other retail operation on the web that isn't Amazon and make them a consolidated Amazon killer. Like, where you can the reason we love Amazon is you can get anything there, right? And you can just check out and go.

Travis Hoium: On the foot side, that would mean that Shopify would be a winner because they're helping power those.

Lou Whiteman: I guess, unless Google wants to eventually move there. But look, if they can become the shopping default for discovery and research, why can't they be the place you check out, too? Which isn't ideal for Shopify, but I do think that, I'm not ready to short Amazon on this. I think it's still ambitious and it involves changing consumer habits, good luck with that. But I do think that Amazon is sort of the interesting company to spotlight with what Google's doing.

Travis Hoium: Rachel, what comes to mind?

Rachel Warren: I think the big takeaway for me is the AI landscape. It's not heading towards a winner-takes-all monopoly. I think what we are going to continue to see is the fragmentation of the space into specialized territories with every player playing to their own kind of specific strength. We've been talking a lot about Alphabet today. Their advantage is the sheer distribution they have. They have an unmatched flywheel. They're weaving Gemini into Search, Android, YouTube, they're winning in that passive consumer lane, especially with people that don't care about AI models, but maybe they just want to use their phone or their search bar to get smarter results and outcomes. You think about OpenAI, right? They have the agility, the developer mind. Got very high operational bird rates. They have a very heavy reliance on capital backing, but there is a very different place within this industry in which they operate. Then you go to Invidia, they're insulated from the software battle because they control that foundational hardware toll road. Obviously, Alphabet is scaling your own.

Travis Hoium: What it's notable that two of the biggest companies, Google and Anthropic train their models on TPUs, not on Nvidia chips.

Rachel Warren: That's the thing. That is one note I want to add, we were talking about sort of the lack of, at least in my view, utility of these new glasses. I think the hardware utility for Alphabet is as they're scaling that TPU business. But do I think that means suddenly, and video chips go away? No, I think we could live in a growing enterprise world where there is room for multiple successful players. I think we're seeing that advantage play out, and I do think 10 years from now, this is a far more fragmented space than we see today.

Travis Hoium: Definitely a lot for investors to follow, especially since these are some of the biggest companies in the world. They drive the S&P 500, they drive the NASDAQ. Whether you're investing in index funds or individual stocks is probably pretty big implication for you.

As always, people on the program may have interest in the stocks they talked about in The Motley Fool may have formal recommendations for gains, so don't buy or sell stocks based solely on what you hear. All personal finance content follows The Motley Fool’s editorial standards; it's not approved by advertisers. Advertisements are sponsored content and provided for information purposes only. See our full advertising disclosure. Please check out our shop. For Lou Whiteman, Rachel Warren, and Kristi Waterworth behind the glass, I'm Travis Hoium. Thanks for listening. We'll see you here tomorrow.

Lou Whiteman has positions in Shopify. Rachel Warren has positions in Alphabet, Amazon, Apple, and Shopify. Travis Hoium has positions in Alphabet, Shopify, and Uber Technologies. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Broadcom, Dropbox, Meta Platforms, Nvidia, Shopify, Uber Technologies, and Warby Parker. The Motley Fool has a disclosure policy.