Alphabet scores with Gemini AI

Alphabet often faces critical voices regarding its efforts in the field of Artificial Intelligence (AI). Recently, the platform The Information reported that the company's Gemini AI model is more challenging for app developers and businesses to use compared to models from competitors like OpenAI. However, within days of the report, Alphabet announced several significant achievements with Gemini. One of the most notable advancements was the integration of the Gemini AI model into Snap's My AI chatbot. Originally based on OpenAI models, Snap began integrating Gemini early this year because the model can simultaneously handle audio, video, and text processing. Snap CEO Evan Spiegel emphasized that the previous inability of the chatbot to quickly process videos and images had limited their vision. Since integrating Gemini, the chatbot saw a 2.5-fold increase in user interactions when sending photos and videos. Additionally, Snap is considering integrating Gemini into its newly launched Spectacles smart glasses. Furthermore, Warner Bros. Discovery will use Gemini to generate subtitles for unscripted programming on the Max streaming service. The company expects to halve the costs of subtitling and reduce the time required by 80%. Alphabet also announced a partnership with Volkswagen to develop a new AI smartphone assistant. By integrating vehicle maintenance data and YouTube videos into Gemini, VW owners will be able to ask questions and receive relevant information directly. This new feature will initially be available for Atlas SUV models. Alphabet also reported several new and expanded partnerships for Gemini AI, including companies like Best Buy, Scotts Miracle-Gro, Telecom Italia, and UPS Capital. These deals demonstrate that Gemini can indeed compete with OpenAI in specific areas like video and image processing—and in some cases, it is even superior. Alphabet's Google Cloud division is also benefiting from AI developments, with a revenue growth of 29% in the last quarter and significantly increased operating income. Additionally, Alphabet remains a leader in the industry thanks to its dominant search engine, Google. Despite the ongoing antitrust case, there is no indication that major competitors like Microsoft could threaten this position. While new AI search providers like Perplexity and SearchGPT do not yet have the same user base and thus face monetization challenges, the introduction of new advertising formats offers significant opportunities for Alphabet. This is often overlooked when critics highlight the potential risks of the AI strategy. Currently, Alphabet's stock is trading at an attractive valuation with a forward price-to-earnings ratio of 18 and a PEG ratio of below 0.7. This points to an undervaluation. Given the positive momentum of Gemini and the low stock price, now might be a good time to purchase Alphabet shares.