Despite a reported delay in the release of Alphabet’s Gemini 3.5 Pro model, investors are urged not to panic sell. The company boasts an impressive 900 million monthly Gemini users and is generating significant revenue from its AI efforts, including a substantial partnership with Apple.
Furthermore, Alphabet is investing heavily in AI hardware, with a new custom chip expected to boost efficiency. With a P/E ratio lower than the tech sector average, Alphabet stock may present an attractive investment opportunity amidst the AI boom.
Some investors have reportedly begun selling off Alphabet (GOOGL, GOOG) stock due to a perceived delay in the release of its advanced Gemini 3.5 Pro model. However, this reaction may be shortsighted, failing to acknowledge the company's substantial progress in the AI space, particularly its rapidly growing user base for Gemini.
Alphabet's stock has been performing slightly ahead of the S&P 500 year-to-date, but the recent sell-off suggests some shareholders are overlooking the significant strides the company has made. The key figure driving this argument is the impressive 900 million monthly users that Gemini has already amassed.
Gemini User Base Surges Past 900 Million
While it's understandable for investors to be disappointed by delays in new model releases, especially when competitors like Claude and ChatGPT are perceived to be more advanced in certain areas like coding, the sheer scale of Gemini's user adoption cannot be ignored. The company is reportedly still refining Gemini 3.5 Pro, aiming for peak performance before its public launch.
Despite the anticipation for the latest iteration, Alphabet has more than doubled its Gemini user count in under a year, reaching a remarkable 900 million monthly active users as of May. This rapid growth highlights the company's strategy of integrating Gemini across its vast ecosystem of products and services.
Alphabet's widespread reach through services like Google Search, Android, YouTube, and Google Workspace, all of which incorporate Gemini, has been instrumental in driving this user adoption. Unlike rivals OpenAI and Anthropic, Alphabet leverages its existing user base to seamlessly introduce and grow Gemini's presence. This integration strategy is expected to pay off as Gemini is increasingly bundled into broader software subscription packages.
Furthermore, Alphabet is already monetizing its AI advancements effectively. The company generated $1.2 billion in revenue from Gemini last year. A significant boost comes from its partnership with Apple, which is reportedly using Gemini as the core AI model for the upcoming Siri enhancements. This deal is expected to bring in approximately $1 billion annually for Alphabet.
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Alphabet's Innovation in AI Hardware Continues
Beyond its software advancements, Alphabet is also pushing the boundaries in AI hardware. Recent reports indicate the development of a new custom chip, codenamed "Frozen v2," which integrates Gemini architecture directly onto the processor. This innovation promises to significantly enhance AI processing efficiency, potentially offering six to ten times more AI tokens per unit of power compared to the company's current Tensor Processing Units (TPUs).
Although the Frozen v2 chip is not expected to be released until 2028, it underscores Alphabet's long-term commitment to maintaining a competitive edge in AI processor technology. This strategic investment in hardware demonstrates a proactive approach to future AI demands.
The AI Boom Requires Patience, Not Panic
Alphabet's impressive user growth for Gemini, substantial AI revenue, and continuous investment in cutting-edge AI hardware are strong indicators of its market position. Investors should consider these fundamental strengths before reacting hastily to minor delays.
The AI landscape is dynamic, and even tech giants like Alphabet require time to adapt and innovate. The company's current stock valuation, with a trailing P/E ratio of 26 compared to the tech sector average of 40, suggests that Alphabet shares may be undervalued, presenting a potential buying opportunity for those looking to capitalize on the ongoing AI revolution.
