Alphabet Soars as Wall Street Cheers Arrival of AI Model Gemini

Alphabet surged 5% on Thursday as Wall Street cheered the launch of Gemini, saying the new artificial intelligence model could help narrow the gap in a race with Microsoft-backed OpenAI. Long considered a leader in AI research, Alphabet lost the spotlight when OpenAI’s ChatGPT swept the tech landscape upon its launch in November last year and allowed investor Microsoft to aggressively roll out AI-powered software to businesses. Now, Gemini looks poised to boost Alphabet’s AI heft again. The Google parent said the much-awaited AI system was faster than OpenAI’s latest model and can process different forms of media such as video, audio, and text. It comes in three versions, each designed to use a different amount of processing power.

“Google is beginning to address investor concerns around generative AI innovation and the high cost of running GenAI models through the combination of Gemini’s different model sizes,” J.P. Morgan analysts said. The company was on track to add nearly $80 billion to its market value, if gains hold. The warm reception contrasted with the nearly $100 billion selloff in Alphabet in February after its Bard chatbot shared inaccurate information in a promotional video and a company event failed to impress. “Gemini’s release comes at an interesting point in time when OpenAI/ChatGPT users have been complaining about how updates to the GPT model family have potentially impacted the quality of its output,” Macquarie analysts wrote in a note. “If Google is shipping a GPT-4-beating model, this could help gather user and developer momentum behind Google.”

Alphabet’s AI Advancements

In the September quarter, growth at Alphabet’s cloud unit slowed to a near three-year low, paling in comparison to the rebound seen at Microsoft Azure, which benefited from spending by businesses preparing to roll out AI features. Microsoft currently trades at 30.68 times its 12-month forward earnings estimates, compared with the Google parent’s 19.59.

Market Impact and Industry Response

Alphabet shares ended 5.3% higher on Thursday as Wall Street cheered the launch of Gemini, saying the new artificial intelligence model could help narrow the gap in a race with Microsoft-backed OpenAI. Long considered a leader in AI research, Alphabet lost the spotlight when OpenAI’s ChatGPT swept the tech landscape upon its launch in November last year and allowed Microsoft to aggressively roll out AI-powered software to businesses. Now, Gemini looks poised to boost Alphabet’s AI heft again. The Google parent said the much-awaited AI system was faster than OpenAI’s latest model and can process different forms of media such as video, audio, and text. It comes in three versions, each designed to use a different amount of processing power.

Comparison with Microsoft’s AI Lead

Alphabet has so far trailed Microsoft in the race for AI-driven cloud revenue. In the September quarter, growth at Google Cloud slowed to a near three-year low, paling before the rebound seen at Microsoft Azure. To drive sales of its AI-based offerings, Microsoft has targeted big businesses that already use its software services, while Google has turned to startups, which analysts say have curtailed spending in an uncertain economy. Shares in both the companies have rallied around 50% this year, part of a broader AI-fueled rally in big technology stocks that has driven much of the Nasdaq’s gains. Microsoft currently trades at 30.68 times its 12-month forward earnings estimates, compared with the Google parent’s 19.59.

Industry Expert Opinions

“Some criticism might be that Google is late to the AI party. (But) they want to get it right and they also obviously see the huge opportunity,” said Ken Mahoney, CEO of Mahoney Asset Management in New Jersey. “There’s different ways to grow your company but one of the best ways is with the same customer base by giving them more solutions or more offerings and that’s what I believe this (Gemini) does for Google.”

Conclusion

Alphabet’s launch of Gemini has sparked a significant surge in its market value, signaling a potential resurgence in its AI capabilities. The competition with Microsoft-backed OpenAI and the strategic positioning of Gemini in the AI landscape have garnered positive responses from industry analysts and investors. As Alphabet continues to navigate the evolving AI market, the impact of Gemini on its cloud unit and the broader technology sector remains a focal point for market observers.