Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) shares faced a wave of selling pressure after reports confirmed the delayed release of its Gemini 3.5 Pro model, which was first announced in May.
Some investors reacted sharply to the news, even as Alphabet stock was already barely outpacing the S&P 500 year to date heading into the report.
The knee-jerk reaction reveals that many shareholders have not fully appreciated the remarkable user growth Alphabet has achieved with its Gemini platform in a short time.
Gemini’s monthly active user base more than doubled over the past year, reaching 900 million users as of May, a milestone that underscores the platform’s expanding reach.
Alphabet’s broad software ecosystem, including Search, AI Mode, YouTube, Android, and Google Workspace, gives Gemini an integration advantage that rivals like OpenAI and Anthropic simply cannot match.
Neither OpenAI nor Anthropic commands that kind of presence across so many widely used consumer and enterprise services, which continues to funnel users directly into the Gemini ecosystem.
Alphabet has also demonstrated an ability to convert AI users into paying customers, generating $1.2 billion in sales from Gemini last year as commercial adoption accelerated.
One of the most significant customer relationships involves Apple (NASDAQ: AAPL), which is using Gemini as the underlying AI model powering the new Siri, with Apple reportedly paying Alphabet $1 billion annually for access.
Beyond its software momentum, Alphabet is also making a major hardware investment, with reports from The Information revealing the company is designing a new chip called Frozen v2 that incorporates Gemini architecture directly onto the processor.
The Frozen v2 chip is expected to deliver six to 10 times more AI tokens per unit of power than Alphabet’s current Tensor Processing Unit processors, a potential step change in processing efficiency.
The chip is not expected to launch until 2028, but its development signals how seriously Alphabet is investing in long-term AI infrastructure and competitive positioning.
Concerns around the Gemini 3.5 Pro delay are understandable, particularly given that Gemini currently lags rivals Claude and ChatGPT in key tasks like coding, where performance benchmarks matter to enterprise customers.
However, delays in AI model releases are not uncommon across the industry, and Alphabet’s underlying business metrics suggest the company’s AI strategy remains on a strong trajectory.
Alphabet’s valuation also adds to the investment case, with the stock carrying a trailing price-to-earnings ratio of just 26, compared to the broader tech sector average of approximately 40.
That discount, combined with accelerating AI revenue, a rapidly expanding user base, and new chip development, suggests the selloff may represent an opportunity rather than a warning signal for long-term investors.
