Alphabet heads towards $2trn thanks to Google's AI prospects 

Alphabet’s misfiring AI Gemini product had been viewed as a major setback, but a conference in Las Vegas this week offered investors some reassurance. 

Investors are becoming more optimistic about Alphabet's artificial intelligence strategy, after a run of glitches and misfires that sent its shares tumbling.

The shares are heading back toward what would be a record $2trn (€1.87trn) market value — a milestone surpassed only by Microsoft, Apple, and Nvidia in the US.

They have rallied back from last month’s low when the shares dropped on concerns the company was falling behind in AI.

Using this week’s cloud event to show that its AI model is enterprise-ready despite recent stumbles in its consumer-facing tools, focus is turning to this month’s earnings and a developer’s conference in May. 

While Alphabet’s path to AI monetisation is still seen as cloudy, the stock’s relatively cheap valuation has kept it attractive to many analysts. 

“While the headlines haven’t been favourable, Google’s role in generative AI products will present massive growth opportunities for the stock,” said Sylvia Jablonski, chief executive officer at Defiance ETFs. 

Alphabet is also set to benefit from making its own generative AI tools that can power more precise ads and increase revenues from ad spend, she added. 

Alphabet’s misfiring Gemini product had been viewed as a major setback for a firm known for its technological prowess, with the company in February pausing an image generation feature that drew criticism over inaccurate historical depictions of race.

Reassuring investors

The company’s cloud computing conference in Las Vegas this week offered investors some reassurance, as the firm showed how Gemini can be used to create advertisements, prevent cybersecurity threats and spin up short videos and podcasts. 

Google also showed a new chip designed to handle AI workloads.

News that Apple is considering using Google’s Gemini technology to power AI services added more fuel to the rebound. 

“Google’s hardware advances, Gemini progress, and AI-driven app demos should help sentiment on AI capabilities,” Bank of America analyst Justin Post wrote in a note this week.

“We see Cloud as a positive driver for stock given AI credibility, faster growth, improving margins.” 

 The stock trades at 21 times forward earnings, below Microsoft’s 33 times, and about the same as the S&P 500 Index. 

Bloomberg