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Friday, April 12, 2024

Alphabet Plummets: $90 Billion Wiped Out As Gemini AI Misstep Triggers Sell-off

Alphabet Inc., Google’s parent company, reeled Monday as Wall Street reacted to the controversy surrounding Google’s generative artificial intelligence product, Gemini. 

The fallout saw Alphabet surrender a massive $90 billion in market value. Its shares dropped 4.5% to just $138.75, marking their lowest closing price since the outset of the year. It’s the second sharpest daily decline Alphabet has faced in the past year. 

The controversy is rooted in Google’s Gemini AI service, which has recently come under fire due to various concerns. Primary among them were racially misleading depictions of historical figures by Gemini’s image-generating feature.

Muddying the Reputation

Even as markets remained fairly flat that day, Alphabet’s losses stood out in sharp relief. This unexpected downturn has raised doubts about Google’s branding, as Melius Research analysts Ben Reitzes and Nick Monroe noted. 

Google
Credits: DepositPhotos

Their analysis suggests that the perceived credibility of a firm – especially one that’s deeply involved in the rapidly evolving AI field – could make or break investor confidence.

“As important as the debate on Gemini is, the perception of truth behind the brand is most critical,” they conveyed. 

“Regardless of your view, if Google is seen as an unreliable source for AI to a portion of the population, that isn’t good for business.”

Read More: Berkshire Hathaway Reports Record $97.1 Billion (Highest Ever) Profit in Annual Result

The Bigger Picture

The current controversy and Gemini’s apparent bias underline a broader issue in Alphabet’s AI strategy. 

Google
Credits: DepositPhotos

Analysts are speculating that this debacle could potentially jeopardize Google’s dominance in the online search market. 

The rampant role of AI in online searches and public concerns over the company’s output could push Google into uncharted waters.

Loop Capital analyst Rob Sanderson echoed these thoughts, stating, “This significant misstep in the PR battle surrounding generative AI suggests that Google is trailing and mis-executing in a fast-moving and high-stakes space.”

Also Read: Mistral AI Launches Cutting-Edge LLM in Collab with Microsoft

A Rocky Start to The Year

The incident underscores a challenging year for Alphabet, with their stock down 1% year-to-date. 

This contrasts radically with a tech-heavy Nasdaq that has seen an 8% surge and the broader S&P’s 7% gain. 

Stiff competitors like Microsoft and Meta have also logged double-digit gains in the same period. This disparity further illuminates Alphabet’s shaky standing in the AI technology race, at a time when it seems more crucial than ever.

What matters now is how Alphabet leverages this situation. An organization’s response in crisis often determines its future resilience. 

This may well be the test case that defines Alphabet’s position in the highly competitive AI market space. It’s an opportunity for lessons learned – the hard way.

Read Next: Tesla’s $2,000 Payoff to Bakery Sparks Business Boom After Musk Steps In

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