Long read: How Google Got Its Groove Back and Edged Ahead of OpenAI

Ever since the advent of ChatGPT3 in late 2022 until as recently as a year ago, investors have looked at Google with scepticism. Starting with its core cashflow engine – its search advertising business likely being the most prone to disruption by AI to the fact that despite its early lead in AI through its acquisition of Deep Mind, it had lost the race to the likes of OpenAI and Anthropic. Critics blamed its liberal culture lacking accountability as the main reason. However, Google has bounced back strongly with its AI models rising to the top on most parameters and now boasts of its own TPU chip competing with Nvidia’s GPUs. And its search business is holding up pretty well resulting in it being the best performing stock this year amongst the fabled FANMAGs by a margin. What’s behind this renaissance? Katherine Blunt of the WSJ helps unravel:

“Google’s deep roots in science and research, willingness to pour billions of dollars into developing custom hardware, and leadership changes in recent years that cleared the way for faster experimentation are now paying off. It also has managed to protect its all-important search business—at least for now—from the surging popularity of chatbots, which are changing how consumers use the internet.

Google’s AI work has begun generating substantial revenue through search ads, paid versions of Gemini for consumers and business and sales of new computer chips developed in-house. The November release of Google’s latest Gemini model outperformed ChatGPT on a variety of measures, sending Alphabet’s stock soaring and triggering a Code Red inside OpenAI. That company has since narrowed the race with the launch of a more powerful version of ChatGPT, which still has far more users than Google’s Gemini.”

Losing the AI race seems even more tragic given how early Google was in the game:

“When Pichai rose to the top job at Google in 2015, AI was a technology of keen interest to computer science researchers and almost no one else. The following year, he declared that the company known to consumers for its search engine, maps and productivity tools was going all in on AI.

In a memo posted to the company’s blog, Pichai wrote that the previous decade had been all about a smartphone-oriented world. “But in the next 10 years,” he predicted, “we will shift to a world that is AI-first, a world where computing becomes universally available.”

Google already had laid the foundation with an AI research division called Google Brain, which was co-founded in 2011 by Jeff Dean, a computer scientist who helped develop the neural-network technology that underpins today’s large language models. A few years later, Google acquired DeepMind, the London-based AI research lab co-founded by Demis Hassabis, a chess prodigy who would later share a Nobel Prize for work on an AI system that aids biomolecular research.”

We strongly recommend watching this documentary about DeepMind and Hassabis.

Google seemed to be playing the long game, but it couldn’t ignore the risks of OpenAI taking the lead given its search business shows the power of a winner takes all market. It had to raise its game. It started with the people:

“Dean and Hassabis, Google’s two veteran AI scientists, and James Manyika, a roboticist who joined in 2022, worked to unite the DeepMind and Brain divisions in training AI.

…Google co-founder Sergey Brin, who had recently retired, was at a party chatting with a researcher from OpenAI named Daniel Selsam, according to people familiar with the conversation. Why, Selsam asked him, wasn’t he working full time on AI. Hadn’t the launch of ChatGPT captured his imagination as a computer scientist?

ChatGPT was on its way to becoming a household name in AI chatbots, while Google was still fumbling to get its product off the ground. Brin decided Selsam had a point and returned to work.

…Much of Brin’s work since his return has involved spotlighting problems with Gemini that need fixing. Brin also helped bring AI researchers Daniel De Freitas and Noam Shazeer back to Google in 2024 through a $2.7 billion acquisition of their startup. The two have since helped lead work on Gemini.”

Then the Google Search’s AI mode which we are all too familiar with now:

“To figure out what AI-driven search should look like, the company began a multiteam effort called Project Magi, led by Liz Reid, who became Google’s vice president of search in 2024. The group’s challenge, she explained in an interview, was to figure out how to revamp the search system to quickly present a clear answer to a question when the answer wasn’t contained on a single webpage.

In May 2024, Google introduced AI Overviews—short, AI generated summaries that often appear at the top of search results. The company found that users began doing more complex searches.

What followed was the biggest overhaul of Google’s search engine in years: the development of AI Mode, a search option that answers queries in a chatbot-style conversation.”

Google ended 2025 with a bang: “The news in late November that Google was in talks to sell Meta billions of dollars worth of the chips for its own AI efforts was enough to sink shares of Nvidia, the world’s leading chip maker, by 7% that day.

In an internal memo to employees this December, Pichai sounded a triumphant note. “We’re ending 2025 in a great position,” he wrote. “Thinking back to where we were as a company even just a year ago, it’s incredible to see the progress.””