Some Investors Have Dropped Alphabet Stock Over the Delayed Release of Its Gemini 3.5 Pro Model. Here Are 900 Million Reasons Why They’re Wrong.
Recently, investors appeared to initiate a sell-off of Alphabet (GOOGL +0.58%) (GOOG +0.24%) after reports surfaced that the company’s release of its Gemini 3.5 Pro model — which was announced back in May — is delayed.
Alphabet stock is barely beating the S&P 500 year to date, and the knee-jerk reaction by some shareholders reveals that some investors don’t quite understand how much ground the company has gained in such a short time.
Specifically, the 900 million monthly Gemini users the company now has.
Image source: The Motley Fool.
Gemini users more than doubled to 900 million in less than one year
Understandably, investors are disappointed that the latest Gemini models haven’t been released yet, especially considering that Google Gemini isn’t as capable at important AI tasks like coding as its rivals, Claude and ChatGPT.
The company is reportedly still testing Gemini 3.5 Pro and doesn’t believe it’s ready for prime time just yet. Both consumers and investors have grown accustomed to the steady release of new, more capable AI models and don’t like to see models delayed.
But it’s worth pointing out that Alphabet has more than doubled its Gemini users in just one year, reaching 900 million monthly users in May, and the company is making huge strides to set itself apart from rivals.
For one, it has achieved those impressive user gains because Alphabet’s software and services are everywhere. Billions of people use its Search function, AI Mode searches, YouTube, Android mobile operating system, and Google Workspace, all of which implement Gemini in some form.
OpenAI and Anthropic don’t have the same reach across so many services, and they helped Alphabet turn users of these services into Gemini users. I think this could be a long-term advantage for Alphabet as the company packages Gemini as part of its broader software subscriptions.
And there’s already evidence that Alphabet is successful at turning artificial intelligence (AI) users into paying customers. The company generated $1.2 billion in sales from Gemini last year.
What’s more, Apple is using Gemini as the underlying AI model for the new Siri AI, making a chief competitor one of its biggest Gemini customers. Apple will reportedly pay Alphabet $1 billion annually to use Gemini.
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Alphabet’s got a new AI chip up its sleeve
In addition to the massive progress Alphabet has made with its Gemini user growth and AI sales, news of a brand-new Alphabet processor recently broke, and it could make its AI several times more efficient than before.
Reporting from The Information says Alphabet is designing a chip called Frozen v2 that incorporates some of its Gemini architecture directly onto the processor, providing six to 10 times more AI tokens used per unit of power than the company’s current Tensor Processing Unit (TPU) processors. In short, the Frozen processor could make Gemini processing far more efficient.
The chip isn’t expected to launch until 2028, but it’s another indication of how much effort Alphabet is putting into staying competitive in AI processors.
Knee-jerk reactions aren’t the way to play the AI boom
Alphabet has made massive gains in Gemini users, rapidly expanded AI sales, and continues to invest in new AI hardware to gain an advantage over its competitors.
Given the progress it’s made so far, I think investors shouldn’t give up on Alphabet so easily. AI software and services will evolve over time, and even big tech companies like Alphabet need time to adapt to a shifting market.
Adding to the appeal of Alphabet stock is the fact that its shares are relatively cheap right now. Alphabet stock has a trailing price-to-earnings (P/E) ratio of just 26 compared to the tech sector average of 40, suggesting now could be a good time to buy some Alphabet shares as the company expands its AI position.
