Alphabet shares fell 4% on Thursday after reports surfaced that the company's highly anticipated Gemini 3.5 Pro artificial intelligence model is delayed by several months due to ongoing efforts to improve its performance, particularly in coding capabilities, which have not met internal expectations [1]. The delay comes at a time when competitors such as OpenAI and Meta have launched new AI models that reportedly surpass Google's current offerings in generating software code [1].
The Gemini 3.5 Pro model was initially announced in May during Alphabet's annual Google I/O developer conference, with the company stating it was being used internally and would be ready for broader rollout the following month. However, the latest report indicates that the release is behind schedule [1]. An Alphabet spokesperson told CNBC that the company is 'shipping quickly across a wide range of models while keeping them highly cost-effective for customers,' and that they are currently testing 3.5 Pro, an upgraded Flash model, and other models with partners, while also engaging with the U.S. government [1].
The competitive landscape in AI code-generation is intensifying, with Meta recently debuting its Muse Spark 1.1 AI model, described by the company's AI chief Alexandr Wang as their 'strongest model for agentic and coding work yet.' OpenAI also released its GPT-5.6 SolAI model, which CEO Sam Altman claims is 54% more token efficient on agentic coding tasks, highlighting the industry's focus on cost-effective, high-performance AI coding solutions [1].
Market reaction to the news was swift, with Alphabet's stock breaking below a near-term support level on increased downside volume. Immediate support is identified near $127, with resistance at $135. Market sentiment is described as cautious, with analysts noting that while Google remains well-positioned, delays in flagship AI products could impact short-term investor confidence. John Belton of Gabelli Funds commented that Google 'is still a well-positioned company,' but emphasized the importance of keeping pace with AI innovation [1]. Some market participants advise monitoring Alphabet's price action around the $127 support zone, as a sustained break below could indicate further weakness, while a bounce may suggest stabilization as investors await updates on the Gemini 3.5 Pro rollout [1].
CONCLUSION
Alphabet's delay in releasing the Gemini 3.5 Pro AI model has triggered a notable negative market reaction, reflecting concerns over the company's competitive positioning in the rapidly evolving AI sector. While analysts maintain that Alphabet remains fundamentally strong, the delay underscores the importance of timely innovation in maintaining investor confidence.