Google (GOOG) Stock Fails at Resistance as Gemini Setbacks, Rising Costs Test Investors

Quick overview

Investors are questioning if Alphabet’s enormous AI expenditures can produce the returns required to support its premium valuation due to Gemini delays, growing infrastructure costs, talent losses, and escalating competition.

Alphabet Faces Renewed Pressure Ahead of Earnings

Alphabet shares have come under renewed pressure after failing to hold last week’s rebound, with investors once again focusing on the growing costs and execution risks surrounding the company’s artificial intelligence strategy.

After briefly rallying toward the $375 region, the stock reversed sharply lower and slipped back toward $355 ahead of next week’s earnings report, highlighting increasingly fragile sentiment toward large technology companies heavily exposed to AI spending.

The upcoming quarterly results are shaping up to be one of the most important events of the year for Alphabet investors, as markets seek evidence that the company’s enormous infrastructure investments are translating into sustainable revenue growth and profitability improvements.

For many investors, the debate is no longer whether artificial intelligence will transform the technology industry, but whether the financial returns can justify the unprecedented level of spending required to compete.

Gemini Delays Raise Execution Concerns

Adding to the pressure, reports suggest Alphabet is facing delays in launching Gemini 3.5 Pro, the latest version of its flagship AI model.

According to reports, the model had originally been expected to launch in June following comments from CEO Sundar Pichai during Google’s annual developer conference earlier this year. However, the release timetable has reportedly slipped as engineers continue working to improve coding capabilities and overall performance.

The delay comes at an uncomfortable moment for Alphabet as competition across the AI industry intensifies rapidly.

OpenAI, Anthropic, and several emerging rivals continue releasing increasingly capable models, raising the competitive bar for every major technology company.

Reports suggest that some Google engineers and researchers have become concerned that competing models are outperforming Gemini in several important benchmarks, particularly in enterprise and software development applications.

Google reportedly updated Gemini’s training data recently in an effort to improve those capabilities, but the improvements are said to have fallen short of internal expectations.

While delays to advanced software projects are not unusual, investors worry that execution setbacks could make it harder for Alphabet to defend its position in one of the technology sector’s most important growth markets.

Earnings Become a Critical Test

The upcoming earnings report is likely to become a major referendum on Alphabet’s AI strategy.

Wall Street currently expects second-quarter earnings per share of approximately $2.86, representing growth of nearly 24% compared with the same period last year.

However, the market’s attention will extend far beyond headline earnings figures.

Investors are expected to focus heavily on Google Cloud, which has become the clearest indicator of Alphabet’s ability to monetize its artificial intelligence investments.

Cloud revenue grew approximately 63% year-over-year during the previous quarter, reaching nearly $20 billion.

Maintaining that momentum will be crucial if Alphabet hopes to convince investors that its AI investments are creating measurable commercial opportunities.

Any signs of slowing cloud growth could revive concerns that enterprise AI adoption is progressing more slowly than expected despite significant customer interest and a substantial contract backlog.

Technical Levels in Focus

From a chart perspective, Alphabet  slipped below its 50-day moving average (yellow) near $320 in February and the 100 SMA (green) at $300 was broken too, which opened the door for further losses toward $270.  That’s where the 200 SMA (red) stood and it provided support, holding the decline and we saw a rebound from there, sending GOOGL above $408 on in May but reversed in June and is heading lower again, slipping below $360 today after failing to break above the 50 daily SMA.

GOOGL Chart Daily – The 50 SMA Held Again As Resistance

Massive AI Spending Continues to Worry Investors

Alphabet’s infrastructure spending remains one of the largest areas of concern for investors.

The company has committed an estimated $190 billion toward AI-related capital expenditure, including investments in data centers, custom processors, networking infrastructure, and advanced computing capacity.

Management continues to argue that these investments are essential to maintaining technological leadership and competing effectively against rivals.

However, investors are becoming increasingly focused on the timeline for returns.

The broader technology sector is facing similar scrutiny as companies race to build AI infrastructure while the direct financial benefits remain difficult to quantify.

For Alphabet, the challenge is proving that today’s spending will eventually generate enough revenue growth to justify the enormous costs being incurred.

Talent Departures Add Another Layer of Risk

Competition for elite AI researchers has become one of the industry’s biggest battlegrounds.

Recent reports of high-profile departures have therefore attracted significant investor attention.

Among the most notable names is Noam Shazeer, one of the key figures behind Google’s AI development efforts and an important contributor to Gemini-related projects.

Alphabet previously spent billions to strengthen its relationship with Shazeer and his startup after his earlier departure from Google, making reports of renewed movement within the talent pool particularly sensitive.

Additional reports surrounding the departure of prominent researchers from DeepMind have further highlighted the increasingly aggressive competition for leading AI talent.

While Alphabet continues to employ some of the world’s most respected researchers, retaining that advantage is becoming more difficult as competitors offer increasingly attractive opportunities.

For investors, talent retention is becoming almost as important as access to computing power.

Regulatory Risks Continue to Build

Artificial intelligence is not the only issue weighing on sentiment.

Alphabet continues to face significant regulatory scrutiny surrounding its search business and digital advertising operations.

Recent reports suggest antitrust investigations could enter a more aggressive phase, with investors increasingly discussing the possibility of structural remedies or divestitures involving portions of Google’s business.

Even without major legal changes, prolonged regulatory uncertainty can weigh heavily on valuations by making future cash flow assumptions more difficult to model.

For institutional investors, these risks add another reason to adopt a more cautious stance toward the stock.

The Cost of Leadership Is Rising

Alphabet remains one of the strongest businesses in global technology, supported by dominant positions in search, digital advertising, cloud computing, and mobile software.

Revenue growth remains robust and profitability continues to exceed most competitors.

However, the market narrative is changing.

Rather than rewarding growth alone, investors are increasingly focused on execution, cost discipline, and the ability to convert AI investments into sustainable earnings growth.

The combination of Gemini delays, rising infrastructure costs, talent competition, and regulatory uncertainty has made the investment case more complicated than it appeared earlier in the year.

For now, investors appear willing to support Alphabet’s long-term ambitions, but patience is becoming increasingly conditional on results.

Next week’s earnings report may provide the clearest indication yet of whether Alphabet’s AI strategy is beginning to deliver the financial returns that markets are demanding.

Strong Growth, but Costs Are Rising

Despite robust fundamentals, concerns are building around spending. Alphabet’s core businesses—search, advertising, and cloud—continue to perform strongly, but the cost of maintaining that growth is increasing.

Estimates suggest capital expenditures could reach $175 billion to $185 billion in 2026, driven by infrastructure buildout and AI development.

• Higher capex may pressure margins
• Monetization of AI products remains uncertain
• Returns on investment could take time to materialize

This shift has prompted investors to look beyond revenue growth and focus more closely on profitability.

ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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