Google Tests AI Search Ads as Big Tech AI Spend Targets $650 Billion

This article first appeared on GuruFocus.

Alphabet’s Google (NASDAQ:GOOG) is beginning to press more directly on AI monetization, layering commerce and advertising into Search’s AI Mode and its Gemini chatbot as usage scales. In a letter to advertisers on Wednesday, the company outlined tests of new ad formats inside AI-powered search results, enabling retailers and brands to surface products directly within AI-generated answers. Users can now purchase items from Etsy (ESTY) and Wayfair (NYSE:W) inside Gemini, and a feature called Direct Offers within AI Mode will allow brands to present discounts to prospective shoppers. Vidhya Srinivasan, Google’s vice president overseeing ads and commerce, said the company is not merely placing ads into AI experiences, but reworking what advertising could represent in that environment.

The strategic context is hard to ignore. As consumers grow more accustomed to AI interfaces, large technology platforms are under pressure to convert engagement into revenue beyond subscriptions. Advertising and commerce could become central funding mechanisms for the substantial infrastructure buildout underway. Capital expenditures by Google, Amazon.com (AMZN), Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT) are projected to reach a record $650 billion in 2026, highlighting the scale of investment tied to AI. OpenAI has begun testing ads in its ChatGPT chatbot in the US, suggesting that advertising may be viewed as a faster path to monetization for users who do not subscribe to premium tiers. Both OpenAI and Perplexity AI have also introduced AI-driven shopping features that could reshape online purchasing behavior.

Earlier this year, Google began integrating AI agents into its shopping framework, introducing a standardized payments and digital identity method that enables checkout directly within its AI products. The company partnered with Shopify, Target and Walmart on the protocol, which Srinivasan described as laying the foundation for more seamless, agent-led commercial experiences over time. The implication is that AI could eventually transact on behalf of users, though the initiative has drawn scrutiny in Washington. Senator Elizabeth Warren has expressed concerns in a letter about consumer privacy and the potential for users to be steered toward higher spending. Google has said it prohibits merchants from displaying higher prices on Google than on their own websites, as it balances commercialization ambitions with regulatory oversight.