Alphabet (GOOG, GOOGL) stock experienced a notable dip of approximately 2% on Friday morning trading. This downturn followed a Bloomberg report suggesting that the company's highly anticipated Gemini 3.5 Pro AI model is facing significant delays, potentially months behind schedule.
Image source: Alphabet.
Google Aims to Lead in AI Coding Capabilities
The delay is particularly concerning as Alphabet strives to compete with AI frontrunners OpenAI and Anthropic. Sources indicate that Gemini 3.5 Pro is currently lagging behind its rivals in coding software capabilities, a key area of development in the AI race. Engineers are reportedly frustrated by this performance gap.
Furthermore, Alphabet faces the complex challenge of optimizing Gemini 3.5 Pro for a wide range of its core products, including Google Search, Google Maps, and YouTube, while simultaneously enhancing its coding prowess. This balancing act adds another layer of difficulty to the development process.
Adding to the complexity, governmental oversight from the U.S. is also a factor. The government intends to rigorously test and approve advanced AI models to ensure their safety and prevent potential security risks, which could further impact rollout timelines.
The significant financial commitment Alphabet is making to AI development, with an estimated $187 billion in capital investment projected for the year, underscores the high stakes. This substantial investment is expected to consume nearly all of the company's projected $212 billion in operating cash flow, leaving a much smaller free cash flow compared to the previous year.
If these investments do not yield a competitive edge against OpenAI and Anthropic, investors may react negatively, potentially leading to further selling pressure on Alphabet stock.
