Can Google overcome the sudden development bottlenecks of Alphabet Gemini before aggressive rivals permanently capture the generative AI market?
Why is the Alphabet Gemini launch delayed?
The primary catalyst behind the sudden downturn in Alphabet shares is a report from Bloomberg indicating that the flagship Alphabet Gemini 3.5 Pro model is currently months behind schedule. Sources close to the matter revealed that the model’s code-generation capabilities have fallen short of Google’s internal expectations. This bottleneck comes at a highly critical time, as aggressive competitors like OpenAI and Meta Platforms have recently introduced highly efficient open-weight models that outpace Google’s current offerings in software development tasks.
An Alphabet spokesperson responded to the concerns by stating that the company is shipping quickly across a wide range of models while keeping them cost-effective. The developer confirmed that Google is currently testing the 3.5 Pro version alongside an upgraded Flash model with early partners. However, the software delay has reignited fears on Wall Street that the company is losing its competitive edge in the generative AI race, despite massive capital expenditure commitments.
How does EU regulation threaten Alphabet Gemini?
Adding to the regulatory headwinds, the European Commission announced binding rules under the Digital Markets Act (DMA) targeting Google’s mobile ecosystem. By July 2027, the tech giant must grant rival AI assistants full access to the Android operating system. This means alternative services can be activated via voice commands just like “Hey Google” and perform complex in-app actions.
Furthermore, European antitrust regulators are forcing the company to share valuable search query and user behavior data with third-party search engines and competing AI chatbots starting January 2027. While Brussels aims to foster competition, Google has criticized the decision, warning that sharing private search data with unknown companies poses a severe risk to user privacy and security. These regulatory shifts mean that the proprietary advantages of the Alphabet Gemini ecosystem on mobile devices will face unprecedented competition in Europe.
Is Wall Street still bullish on Google?
Despite the short-term technical damage, several prominent investors and financial institutions remain highly optimistic about the company’s long-term trajectory. Legendary investor Warren Buffett recently confirmed that he personally initiated Berkshire Hathaway’s massive position in Alphabet, which now stands at approximately $31 billion. Berkshire Hathaway, now led by CEO Greg Abel, even participated in a $10 billion private placement earlier this year to fund Google’s expanding AI infrastructure.
Wall Street analysts are divided on the stock’s immediate direction, though average price targets remain highly optimistic. Citigroup and Morgan Stanley maintain extremely bullish outlooks, setting their respective price targets at $671 and $415. Conversely, other institutions have adopted a more cautious stance; Wells Fargo recently trimmed its price target to $416, while UBS lowered its target to $400. Supporters point out that the company’s cloud business remains incredibly strong, boasting a 63% revenue surge in the first quarter of the year.
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The today’s decisions risk undermining important protections for the privacy and security of millions of Europeans.— Alphabet Spokesperson
For a deeper dive into the tech giant’s financial health, read our detailed analysis on the Alphabet Earnings: Strong Financials and AI Innovations Fuel Google, which highlights how cloud growth and infrastructure monetization have supported Wall Street’s long-term valuation. Meanwhile, the broader tech sector is experiencing similar capital expenditure pressures, as detailed in our report on Oracle Financials: AI Superstar Facing Massive Balance Sheet Pressures, which outlines the high costs of building out modern AI data centers.
