It's impossible to read financial news these days without seeing multiple articles about artificial intelligence (AI). These headlines range from the demand for cutting-edge semiconductors to which company is winning the race for large language models (LLMs). Which one is ahead and which is behind seems to change daily, with no shortage of opinions on who the winners will be in our AI future.
Alphabet (GOOG +1.01%) and its Gemini LLM have certainly been at the center of these conversations, but at various times they have been counted out or at least faced questions about their positioning in the AI race. This sells short the company's potential to be the leader in 2026. Let's dig deeper to see why the market might be sleeping on this tech giant.
Gemini 3.0
Each time a company releases a new version of its LLM, those who follow the progress in AI are quick to read about the benchmark performance metrics and opine about the degree to which this changes the LLM leaderboard. For a while, it seemed that OpenAI's ChatGPT was ahead, with some in the financial media speculating that Alphabet was being left in the dust.
NASDAQ: GOOG
Key Data Points
However, with the recent release of Alphabet's Gemini 3.0, it appears that the winds have shifted. Recent reports say that while ChatGPT grew its monthly active users by 6% from August to November, Gemini users increased by 30% over that same time frame. This led OpenAI CEO Sam Altman to release an internal memo to his employees warning of "temporary economic headwinds."
If Gemini is now truly in the lead as the preeminent LLM, only time will tell if that lead can last. Several companies are spending a significant amount of capital to improve their AI models, so another LLM may jump ahead in the future. Fortunately for Alphabet, it has advantages that others can't match.
From LLMs to agents
The LLMs like ChatGPT and Gemini are what most people are familiar with because they are consumer-facing and easy to use. However, other than users paying a monthly fee for advanced features, these have yet to drive enough revenue to justify the cost of development. This is where Alphabet's advantage kicks in.
The next phase of the AI build-out is likely to be with so-called agents. Put simply, AI agents are assistants built into the products we use every day that help us be more efficient. The average user of Google products has probably already seen prompts to use Gemini and will likely see more.
Consider a Gmail user who can have Gemini help draft an email or search for a long-lost message more efficiently. Or the driver on a road trip who can have a conversation with Gemini within the Google Maps app to help find somewhere to stop for a unique sightseeing experience along the way. Considering how many Google products are used each day, it's easy to find more and more uses for a smart assistant to help out.
Valuation matters
Alphabet stock has been on an impressive run recently, growing 83% over the past year and outpacing its AI contemporaries, Microsoft and Nvidia, by a significant margin. However, even after this outperformance, Alphabet still has the lowest valuation of the three, trading for just under 32 times trailing earnings.
That multiple is not cheap, but it's an indication of a market that could be either overestimating Nvidia and Microsoft, or underestimating Alphabet. Either way, that dislocation could benefit Alphabet shareholders.
There's still a lot of optimism priced into the company's shares, but it's in a position to post results that live up to its lofty valuation. With the leading LLM and the clearest path to drive customer adoption -- and ultimately increased revenue -- Alphabet has the best shot at being the AI winner of 2026.
