Alphabet Shares Fall as Gemini 3.5 Pro AI Model Launch Is Delayed

Alphabet (GOOGL) shares are under pressure after the company delayed the launch of its flagship AI model, Gemini 3.5 Pro, fueling investor concerns about its ability to keep pace with rivals. The stock fell approximately 3% on July 16 after the news and continued its decline on July 17, trading at $345.31, down another 2.58%.

Execution Concerns Mount

The immediate headwind for the stock is the missed June deadline for Gemini 3.5 Pro. According to a July 16 report from Bloomberg, engineers and managers within Google have expressed worries that competitors like OpenAI and Anthropic are releasing models that outperform Gemini on key performance benchmarks.

This delay adds to existing concerns about the company's AI execution. In June, Alphabet's stock fell about 10% following the departure of several high-profile AI researchers, a trend some analysts view as a signal of organizational stress.

The Bull Case: Infrastructure and Adoption

Despite the recent setbacks, Wall Street remains broadly bullish, with 57 Buy ratings versus just 7 Holds. Analysts at firms like BMO Capital Markets and Wells Fargo argue that Google's vast infrastructure provides a significant competitive advantage. They point to several key factors supporting this thesis:

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• A plan to reach 35 gigawatts of compute capacity by 2028, a scale few rivals can match.
• Projections for Google Cloud Platform to grow 60% in fiscal year 2026, driven by enterprise AI demand.
• A low price-to-earnings-growth (PEG) ratio of 0.6, suggesting its AI potential may not be fully priced into the stock.

Recent enterprise wins, such as Intel's decision to deploy Gemini Enterprise across its global workforce, signal tangible market traction for Google's AI offerings.

Analyst Outlook and Key Catalysts

Analysts largely see the recent selloff as a potential opportunity, though they acknowledge the execution risks. Wedbush initiated coverage with an Outperform rating on July 14, and Wells Fargo maintains an Overweight rating with a $387 price target, implying roughly 12% upside. However, this positive outlook is contingent on Gemini 3.5 Pro launching soon and meeting performance expectations.

Beyond the current model race, analysts are watching two potential long-term catalysts: the growth of Gemini subscription revenue as a new income stream and a potential partnership to integrate Gemini into Apple's Siri. Meanwhile, regulatory risks persist, with Switzerland's competition commission recently launching a preliminary antitrust probe into Google's Android search choice screen.