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Shares of Alphabet Inc. experienced a notable surge on Thursday following the release of the company’s Gemini AI model, alleviating concerns about its competitive standing in the fiercely contested artificial intelligence market. The stock recorded a significant gain of 5.3%, marking its most substantial one-day percentage increase since July. This rally contributed over $87 billion to Alphabet’s market capitalization. Year-to-date, Alphabet shares have risen by 55%, surpassing the 46% gain of the Nasdaq 100 Index and aligning closely with the 55% increase seen in Microsoft Corp, a significant AI competitor due to its investment in OpenAI.
Despite the strong performance in 2023, Alphabet’s shares have traded within a range in recent months, reflecting investors’ close scrutiny of any developments indicating strength or weakness in the AI landscape. In October, a disappointing report on Alphabet’s cloud unit, which has been attracting business from AI startups, led to a significant decline in the company’s shares. In contrast, Microsoft’s robust results were viewed positively, driven by strong demand for AI.
Against this backdrop, the release of the Gemini AI model was met with relief by analysts. KeyBanc Capital Markets characterized it as “a flex of years of AI muscle development,” while Roth MKM expressed expectations that “negative AI sentiment toward GOOGL [Alphabet] would fade quickly, leading to an uptick in its valuation multiple.”
Optimism surrounding artificial intelligence has played a pivotal role in driving share prices this year, particularly among megacap technology and internet stocks. Alongside Alphabet and Microsoft, chipmaker Nvidia Corp has seen its stock more than triple, fueled by robust demand for its AI processing chips. Additionally, Advanced Micro Devices Inc., unveiling a new line of AI chips earlier this week, has nearly doubled in value during the year.
The positive reception of the Gemini AI model not only sparked a substantial stock price rally for Alphabet but also underscored the ongoing importance of AI developments in shaping investor sentiment and influencing the valuation of key players in the technology sector.
