Alphabet Stock Skyrockets as Gemini AI Ushers in a New Era of Innovation

Alphabet Stock Skyrockets as Gemini AI Ushers in a New Era of Innovation

Alphabet (GOOGL.O) saw a 5.3% surge in its shares on Thursday as Wall Street celebrated the launch of Gemini, Alphabet’s new artificial intelligence model. This development is seen as a move to regain ground lost to Microsoft-backed OpenAI, which gained attention with its ChatGPT launch last November, allowing Microsoft (MSFT.O) to aggressively introduce AI-powered software.

Gemini is expected to bolster Alphabet’s position in AI research. The Google parent company highlighted that the eagerly anticipated AI system outpaces OpenAI’s latest model, demonstrating faster processing across various media formats such as video, audio, and text. Gemini is available in three versions, each tailored to use different amounts of processing power.

J.P. Morgan analysts noted that Alphabet is addressing investor concerns related to generative AI innovation and the high operational costs of running GenAI models by introducing Gemini’s various model sizes. The positive market response resulted in an over $80 billion increase in Alphabet’s market value, contrasting with the nearly $100 billion selloff in February following issues with its Bard chatbot.

Gemini’s release coincides with OpenAI/ChatGPT users expressing concerns about potential quality impacts from GPT model updates. Macquarie analysts suggested that if Google delivers a model surpassing GPT-4, it could garner momentum among users and developers.

Alphabet has incorporated some Gemini technology into its Bard chatbot and plans to launch the most advanced Gemini version through Bard early next year. A demonstration video showcased Gemini’s abilities, including recognizing sleight-of-hand magic tricks and assisting in art creation based on materials and colors.

In the AI-driven cloud revenue race, Alphabet has trailed Microsoft. Google Cloud’s growth in the September quarter slowed to a near three-year low, while Microsoft Azure experienced a rebound. Microsoft’s strategy targets large businesses using its software services, whereas Google focuses on startups, which analysts note have curtailed spending in an uncertain economy.

Both Alphabet and Microsoft have seen approximately 50% share price rallies this year, fueled by the broader AI-driven rally in big technology stocks. Microsoft’s current valuation stands at 30.68 times its 12-month forward earnings estimates, compared to Alphabet’s 19.59.

Despite potential criticism of Google entering the AI arena later than some competitors, analysts believe this move aligns with a strategic approach to provide solutions and offerings to the same customer base. Ken Mahoney, CEO of Mahoney Asset Management in New Jersey, emphasized the significance of this approach for Google’s growth.

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Ahmed Hassan

Ahmed Hassan, a distinguished Ph.D. holder in Political Science from Stanford University, is your go-to expert for in-depth political analysis. His well-researched articles provide valuable insights into the complex world of politics. Ahmed's commitment to balanced reporting and informed commentary ensures you're always up-to-date with the latest developments in the political landscape.

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