Google’s business is doing great. It’s beating revenue expectations, growing its business and grappling with rapidly-changing technology habits. So why - right when it announced some of its coolest AI features to date - did investors hit the panic button yesterday?

Every year, Google holds its annual summit for developers on the Android platform. It has become a bit of a media event, as the search giant uses it to show off the new features and hardware coming to the ecosystem.

This year’s keynote address took place in San Francisco, starting at around 1pm local time on Wednesday. But not everything went to plan.

What did Google announce?

This year, Google went big on updates to its Gemini AI system that now sits at the core of its Search offering.

The centrepiece was Gemini 2.5 Pro — Google’s most powerful AI brain to date. This version can handle everything from writing code and solving maths problems to understanding video and audio. 

It even has a new “DeepMind-style” feature called Deep Think, which lets it slow down and reason through complex tasks more carefully — a major leap for AI productivity.

But perhaps the biggest change most people will notice is in Search. Google’s introducing something called “AI Overviews”, where instead of just giving you a list of links, the new AI-powered Search experience will summarise the best answers for you at the top of the page. 

Ask a complex question, and it will break it down, search across multiple topics, and give you a clear, AI-generated response — all in one go. It’s rolling out to users in the US first, with more countries to follow.

Google’s also working on a new assistant mode — think of it like an AI agent that can actually do tasks for you. 

Dubbed “Project Astra” and linked to Gemini, the idea is that you’ll soon have AI that can look at your camera feed and help you with real-world tasks, like identifying things around you or helping with step-by-step instructions in the moment. It’s early days, but the demo had clear echoes of where Google wants to take its hardware and AI integrations next.

But none of that was enough for investors, who started to head for the proverbial exits on Google stock from the very second the keynote speech started.

Google speaks, stock dips

When Google’s CEO, Sundar Pichai, opened the I/O keynote, parent-company Alphabet’s Class C stock was trading at $US169.28. When the company wrapped up proceedings, it was 2.3% down. 

If you look at the price chart, you can see that as soon as CEO Sundar Pichai starts speaking to open the keynote, the stock starts to tank. The downward slide continued throughout the session and even into after-hours trading, closing at just north of $US165.

See the graph to time the event:

All of this has happened before

When Google first introduced its take on AI - originally named Bard at its launch in February 2024 and later renamed to Gemini - its stock dropped huge.

The Bard unveil at I/O 2023 was closely watched. It was right after the launch of ChatGPT, before AI was in absolutely everything (even screen protectors). Google had to get it right, but tripped right at the finish line.

Not only was Bard barely functional in the original presentation, it was lack-lustre compared to OpenAI’s ChatGPT. It even gave a factual error in a live demo which had everyone running for the economic lifeboats.

Add to this public breakdown the growing trend of young people moving away from typical Google searches in favour of searching on TikTok or even on ChatGPT. 

Investors thought the party was over, and abandoned the stock in droves. Alphabet Class C stock dropped 7.7% the first day and almost 5% the next day. It took billions off the company’s valuation, crashing from $104 down to just $89.

See the graph of the event:

Screenshot

All of this will (probably) happen again

So should we don our lifejackets as Google reportedly sinks? Not yet.

As the great Warren Buffett tells us, be greedy when others are fearful.

Technology moves fast, but Google still controls a lot of the internet (both physically and virtually), especially in the Search space. And it’s still the number one advertising player on the open internet, both in text ads and in video.

While TikTok might creep into its Gen Z market-share and other privacy-focussed search engines offer a point-of-difference, the arms of Google are still everywhere.

The company rocketed back up at the open overnight, gaining back its losses from the day before - and a little more. It closed this morning (local time) at $US170.06.

Now we’re starting to see the beginnings of a pattern: investors might actually drive Google stock down to a discount on days of big AI announcements before braver money steps in the next day to right the ship and net a tidy short-term profit.

We’ll keep an eye on future Google events to test this theory.