Artificial intelligence powerhouse OpenAI will likely add advertising to ChatGPT, a move that would further pressure the core business of Google-parent Alphabet, say Wall Street analysts. For Google stock, the key question is how soon an ad-supported version of ChatGPT will emerge.
"If OpenAI's ad-supported tier gains traction, there could be ad budget shift concerns for major incumbent platforms (primarily Google Search) affecting their growth outlook," said Bank of America analyst Justin Post in a report.
OpenAI released generative AI-based ChatGPT in late 2022. Microsoft is the biggest investor in OpenAI.
OpenAI has said that ChatGPT weekly active users reached 800 million in May, doubling from February. The company garners most of its revenue from paid subscriptions. It also gets revenue from software developers that access its AI models via cloud computing services as well as licensing fees. OpenAI has stated that it already makes $10 billion in annual recurring revenue.
Google's problem is that big brands and other advertisers could opt to move a big chunk of ad budgets to a new option — ChatGPT. For OpenAI, adding the digital infrastructure to sell advertising could be challenging. OpenAI would not want to damage the ChatGPT user experience.
While OpenAI Chief Executive Sam Altman has downplayed any advertising plans, "we would all be foolish to think an ad-supported ChatGPT isn't in the works in the mid-term," Michael Nathanson, analyst at MoffettNathanson said in a report.
Google Stock: Q1 Search Revenue
In the first quarter of 2025, Google's internet search-advertising revenue came in at $50.7 billion, up 10%, vs. estimates of $50.4 billion.
Nathanson added: "While Google search continues to defy the skeptics, the true challenge to Google's business model is not here and now. Google has a window to challenge their new rival and innovate their search products to stave off competition and limit future risk."
Google stock has retreated about 7% in 2025.
ChatGPT delivers answers to search queries, while Google's business model has been based on providing web links.
In May, Google announced that "AI Mode," its newest generative AI-based search engine, is available in the U.S. Further, AI Mode is a follow-on to AI Overviews, which provides search summaries rather than web links. AI Mode goes a step further with chatbot-style search answers, prompting a conversation.
AI Search Advertising Boom?
Market research firm eMarketer forecasts that "AI search advertising spending will reach $25.93 billion in 2029, up from $1.04 billion in 2025. However, the forecast doesn't factor in ad-supported ChatGPT, analyst Yoram Wurmser told IBD.
"ChatGPT's share of the generative search market in our model would be very small even in 2027 and onward since we don't have a good grasp on how they'll monetize free users," he said in an email.
Meanwhile, OpenAI this year was valued at $300 billion as part of a new $40 billion fundraising round led by SoftBank.
Evercore ISI analyst Mark Mahaney told IBD in an email that OpenAI would leverage its consumer engagement with advertising.
"The opportunity is certainly there, for the same basic reason that Google has been able to so effectively monetize Search usage — it and ChatGPT both have extraordinary insight and access into individual intent and interests," he said in an email. "And marketers will pay to access that intent."
Internet Ads Coming To AI Models
OpenAI and Google are competing with Anthropic, Facebook-parent Meta Platforms and many others in building new AI training systems called large language models, or LLMs. In March, Google unveiled its newest artificial intelligence model, Gemini 2.5. Early reviews of Gemini 2.5 have been positive.
RBC Capital analyst Matthew Hedberg in a recent report said "internet ads are coming to large language models but they may look very different than traditional search ads."
Hedberg added: "While LLM providers are focused on the subscription model in this early phase of adoption, ads are coming eventually with the caveat they may look very different from legacy search ads with more of an emphasis on directly adding value to what a user was truly seeking and not biasing results towards sponsored placements."
Additionally, Google is among artificial intelligence stocks to watch.
Aside from the competitive threat to search advertising revenue, Google stock has been pressured by two Department of Justice antitrust cases. One DoJ lawsuit focuses on Alphabet's internet search business, the other on its advertising business.
Google Stock: Antitrust Ruling Coming In August
Federal judge Amit Mehta has ruled that Alphabet illegally maintained a monopoly over online search services and prevented rivals from developing their own products. Google pays Apple more than $20 billion annually to be the default search engine on iPhones.
In August, Mehta is expected to issue a ruling on remedies, which likely will involve the Apple default search agreements, say Wall Street analysts. Google is expected to appeal.
Perplexity is another new player in generative AI-based search results. There's speculation that Apple might acquire Perplexity to catch up in generative AI. Apple stock has declined 17% this year.
Meanwhile, OpenAI plans to adopt a for-profit business structure. OpenAI has been negotiating with Microsoft, which has invested some $14 billion into the startup, over what equity stake it would get in the restructured company. Also, OpenAI uses Microsoft's cloud computing infrastructure and shares revenue with the software giant.
Finally, Google stock holds an IBD Composite Rating of 83 out of 99. IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better.
Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
