Investors pleased with Google’s AI progress, Alphabet hits new record

Investors have become more optimistic about Alphabet Inc.’s artificial intelligence strategy after a series of glitches and missteps sent its shares tumbling.

The stock market value is recovering to a record $2 trillion, a milestone surpassed only by Microsoft Corp., Apple Inc. and Nvidia Corp. in the United States. The company has rebounded from last month’s lows, when its shares fell on concerns that the company was falling behind in artificial intelligence.

Google eyes enterprise-grade AI solutions

Despite recent troubles with consumer-facing tools, it used this week’s cloud events to show that its AI models are enterprise-ready, with focus now turning to this month’s earnings and a developer conference in May. While Alphabet’s path to monetizing artificial intelligence is still viewed as cloudy, the stock’s relatively cheap valuation makes it attractive to many on Wall Street.

Sylvia Jablonski, CEO of Defiance ETF, said: “While the headlines are not encouraging, Google’s role in generating artificial intelligence products will represent a huge growth opportunity for the stock. ” She added that Alphabet would also benefit from developing its own generative AI tools that could support more targeted advertising and increase ad spend revenue.

Alphabet’s failed Gemini product was seen as a major setback for a company known for its technological prowess, which in February suspended an image-generating feature that drew criticism for historically inaccurate depictions of race.

The company brought some comfort to investors this week at a cloud computing conference in Las Vegas, where it demonstrated how it can use Gemini to create ads, protect against cybersecurity threats and play short videos and podcasts. Google also showed off a new chip designed to handle artificial intelligence workloads.

Is Apple going to use Google’s Gemini?

The news that Apple is considering using Google’s Gemini technology to support artificial intelligence services has added more impetus to the rebound. As of last close, the stock had gained 12% this year.

“Google’s hardware advancements, Gemini’s progress and AI-driven application demonstrations should help boost confidence in AI capabilities,” Bank of America analyst Justin Post wrote in a note on Tuesday. “ We see cloud as a positive driver for the stock given the credibility of AI, faster growth and improving margins.”

The stock trades at 21 times forward earnings, below Microsoft’s 33 times and about the same as the S&P 500. Alphabet shares rose 0.7% on Thursday.

Michael Lippert, vice president and portfolio manager at Baron Opportunity Fund, said that while “a lot of people think it’s such a bargain right now,” not everyone is convinced of the discount.

He said that given the fierce competition in search, Alphabet “should invest every dollar into its business with a higher ROI (return on investment).”

For now, the company’s latest news is at least giving investors some encouragement. JPMorgan analyst Doug Anmuth said this week that he expects the Gemini integration to bring more than 20% revenue growth to Google Cloud.