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Alphabet Soars on Gemini 3 AI Model, But Hurdles Remain

MOUNTAIN VIEW, CA – Alphabet (GOOGL/GOOG) has solidified its position as a frontrunner in the artificial intelligence race, fueling a dramatic stock rally. The catalyst is the company’s new Gemini 3 large language model, hailed as a significant leap forward and a competitive advantage over rivals like OpenAI’s ChatGPT.

Since September, Alphabet stock has surged roughly 48%, driven by strong Q3 earnings, a favorable resolution in its antitrust case, and the excitement surrounding Gemini 3’s multi-modal capabilities (generating text, video, and images). Analyst Malik Ahmed Khan of Morningstar notes that the company’s Google Search and Cloud businesses must stay resilient to maintain the rally.

The model’s success has led to a substantial increase in monthly active users, and analysts predict further growth in the upcoming Q4 earnings report. Furthermore, Alphabet’s in-house tensor processing units (TPUs), custom chips for training and running AI models, offer a new potential revenue stream through third-party partnerships.

However, challenges remain. Khan points to potential softening in Google Search and Cloud revenue, as well as possible higher-than-expected capital expenditures. Alphabet’s ability to scale TPU production is also limited by shared manufacturing constraints with Nvidia. The long-term health of Google Search, which contributes 30-40% of Alphabet’s business value, is still a key factor in the company’s future success.

Morningstar maintains a “wide economic moat” rating for Alphabet, citing its intangible assets, network effect, cost advantages, and customer switching costs. Khan’s fair value estimate for the stock is $340 per share, reflecting a 2025 adjusted price/earnings multiple of 32 times. The bottom line depends on investors’ conviction in Google Search.

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