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Alphabet (NASDAQ:GOOG; NASDAQ:GOOGL) stock climbed on the AI hype train Dec. 6 by launching Gemini, a Large Language Model it claims is better than OpenAI’s ChatGPT. Excitement over what AI can do, and what database computing is doing, has started a new computing arms race.

Companies are demanding Nvidia (NASDAQ:NVDA) chips and software. They see their old databases as a new goldmine, hiring AI experts and investing in things like GOOGL stock. I saw this movie in the late 1990s. It did not end well.

A Closer Look at GOOGL Stock

Big tech stocks have been on the AI Hype Train for over a year, ever since OpenAI launched its ChatGPT, with the open backing of Microsoft (NASDAQ:MSFT).

Alphabet delivers AI computing services through Google Cloud. It is re-architecting its cloud to handle the new demand. Shares are up 40% in the last year, adding $600 billion to its market cap.

But there are doubters. Bears see Alphabet as an advertising-driven company. They wonder how search will do if people can get answers rather than just sources.

Bears also warn that Google must tread carefully in everything it does. A jury recently said Google did evil to Epic Games. This could threaten the health of its Android Play Store. Europeans want to break up the company’s ad tech unit, the beating heart of its financial performance.

So far these are only threats. Alphabet revenues were up 11% year-over-year in the third quarter, and operating margins rose to 28%. Net income came to nearly $19.7 billion, $1.55 per share. If it can hit estimates of $6.14 in earnings next year, the forward price to earnings ratio is a reasonable 22.

As our Joel Bagliole wrote recently, “Buy Alphabet Stock Now to Bet on the Future of AI.”

But Is Gemini Any Good?

Whether Google wins the AI game hinges on Gemini.

Gemini is a family of Large Language Models from Google’s DeepMind unit. The launch event pushed Alphabet stock to $140/share on December 7. It’s now up just 2% from where it was before the event.

The demo looked amazing, but those who peered behind the curtain were unimpressed. There were lots of Internet buzzwords to make you swoon but reporters found the technical details missing key components.

What users will first see are improvements to Google’s Bard chatbot. The event took advantage of the turmoil at OpenAI and seemed like a PR exercise as much as anything.

A quick look under the hood left some tech reviewers unimpressed. There remain a lot of questions to answer.

Show Me the Money

The most important question is how Gemini benefits GOOGL stock.

When any technology is new, this question is seldom asked. But the Gartner (NYSE:IT) hype cycle shows that every period of inflated expectation is followed by a “trough of disillusionment.”

Here’s an example. I made a six-figure living as an “Internet Commerce” expert in the late 1990s. In the year 2002 I made exactly zero dollars. Yet you’ll note that Internet Commerce has more than lived up to its early hype.

How hard AI is hit remains up in the air. But until Alphabet shows customers getting value from Gemini, and paying for that value, all its world is a stage.

The Bottom Line on GOOGL Stock

In 2024 GOOGL stock must cross a chasm, from search to AI. It must monetize Gemini quickly, because chatbots offer answers, not just lists of resources.

This is a serious threat. Google delivers serious numbers, which are hard to shift. Getting even 11% growth on what is already a $300 billion revenue stream means finding $33 billion of new money.

That’s one reason I recently sold some of my Alphabet holdings, although I still own it. I turn 69 next year, and income means more than capital gains now.

An old man can’t live on hype alone.

As of this writing, Dana Blankenhorn had LONG positions in NVDA, MSFT and GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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