Gemini 3.5 Pro's Delay Stirs Alphabet Stock Woes, Fuels AI Race Concerns

Alphabet highly anticipated Gemini 3.5 Pro, its next advanced artificial intelligence model, has hit an unexpected snag, missing its promised June release and causing a major stir on the stock market. Reports indicate the delay stems from the model's 'coding performance' not meeting Google's internal benchmarks, a critical area in today's AI competition. This setback led to a sharp 4% dip in Alphabet shares on July 16, wiping out nearly $200 billion in market value. The holdup casts a spotlight on Google's standing in the fast-paced AI race, especially as key rivals have been pushing out new, powerful models. While Google announced Gemini 3.5 Pro at its I/O conference in May, competitors like OpenAI have already launched their GPT-5.6 Sol and Anthropic released its Claude Fable 5, putting pressure on Google to deliver. The situation is further complicated by recent reports of senior Gemini researchers reportedly leaving Google to join Anthropic, raising concerns about talent retention amid intense industry competition. All eyes are now on Alphabet upcoming Q2 2026 earnings report, scheduled for July 22. Investors will be keenly watching for a clearer timeline for Gemini 3.5 Pro public release and any updates on Google's broader AI strategy and capital expenditure plans. The company needs to reassure the market that it can quickly resolve these performance issues and keep pace in the fierce battle for AI leadership.