Google's Stock Fell on Its Best I/O in Years. Here's Why BofA Is Still Buying

In brief

• Bank of America reiterates a “buy” on Alphabet with a $430 target—10.9% upside from $387.66.
• The analysts cite AI Overviews at 2.5 billion users, AI Mode at 1 billion, and Gemini doubling from 400 million to 900 million monthly active users in a year.
• The report has some nuance: the stock fell 2% on I/O day, free cash flow is projected to drop ~$29 billion in 2026 due to a capex surge, and BofA openly questions whether AI query monetization will "materially exceed" traditional search.

Google had a great I/O. Then its stock fell 2%. Bank of America still says buy.

BofA analysts Justin Post and Nitin Bansal published their note on May 20 with a maintained “buy” rating and a $430 price objective on Alphabet—10.9% upside from its current price of $387.66. Their verdict: "Google no longer playing catch up, search & agentic announcements demonstrated a wave of leading product innovation."

The bull case runs on three user metrics from Google's own I/O disclosures. AI Overviews—the AI summaries at the top of Search results—now has 2.5 billion users. AI Mode, the conversational layer of Search, has 1 billion and is doubling every quarter. Gemini's monthly active users grew from 400 million a year ago to 900 million today.

BofA's read is that ramp "suggests Google is successfully transitioning Search users toward AI-native experiences, reducing the risk of competitive disruption."

The bank is honest about what's still unresolved, though: whether monetization of AI queries can "materially exceed search" is an open question. More complex queries mean more ad surface area in theory. The data hasn't confirmed it yet.

Five bets on the table

BofA structured its I/O analysis around five product tracks.

On models: Gemini Omni merges Gemini with video and media generation tools—what the bank calls the company's "push toward world-model AI systems capable of understanding and interacting across multimodal environments." Gemini 3.5 Flash brings "materially faster inference speeds and lower costs relative to competing frontier models," a price-performance edge that matters for Cloud wins as much as consumer apps.

On Search: Gemini AI is now integrated directly into Search alongside new "Search Agents"—persistent background agents that continuously monitor finance, shopping, travel, and sports on behalf of users. The redesigned Gemini app adds dynamic layouts, fluid animations, and AI-generated visuals.

On agents: Gemini Spark is a 24/7 cloud-based personal agent handling Gmail, Docs, Sheets, Calendar, Chrome, and third-party services without any user input required. It’s Google’s response to the boom of agentic tools like Hermes and OpenClaw.