Whatever Google has done to improve its artificial intelligence assistant app, called Gemini, over the past year has clearly been worth it.
From 400 million monthly users in May 2025 to 1 billion monthly users as of last month, the app has become the fastest-growing product in Alphabet‘s (GOOG -1.05%) (GOOGL -1.11%) history. It’s the sort of progress that almost makes the $200 billion the company has budgeted for AI infrastructure investments this year worth it.Almost.
Whatever the case, Alphabet’s leadership on multiple AI fronts — regardless of the cost — makes its stock worth stepping into, particularly following its weakness since May.
The free, consumer-facing version of Gemini was never the point
Congratulations are in order. Not only has Alphabet’s Gemini dramatically expanded its user base, but it’s taking market share away from OpenAI’s market-leading ChatGPT (according to numbers from Sensor Tower), as well as from Grok and Perplexity.
Just don’t lose perspective on the dynamic. Although it’s difficult to measure, it would be short-sighted to ignore that Gemini’s traffic is at least partially cannibalizing some of Google’s search engine queries, even if Gemini’s traffic is somewhat comparably monetized.
Don’t worry about it too much either way, though. See, the bulk of Alphabet’s AI spending was never really about a consumer-facing version of Gemini anyway.
Image source: Getty Images.
Don’t misunderstand. There’s a consumer AI assistant market to be sure.
The crux of the AI investments that the company is making this year, however, is the construction of new AI data centers and hardware that won’t necessarily serve a large number of users, but will more deeply serve a smaller number of more active paying customers with tools like Gemini Robotics ER (embodied reasoning), or Gemini Enterprise for Legal, meant for legal professionals.
Then there are the solutions that aren’t interfaced through any iteration of Gemini at all, like machine learning platform Document AI, or AutoML Image, the latter of which trains a platform to understand what digital images are portraying.
These institutional uses of Alphabet’s tech were always going to be the company’s bigger AI profit center, even if they aren’t yet. A recent outlook from Precedence Research suggests the enterprise-level artificial intelligence industry is poised to grow just under 40% between now and 2035, from last year’s $21 billion to 2035’s expected $592 billion.
Given this, Alphabet’s seemingly aggressive AI capex budget of $200 billion this year is justified, as long as Alphabet remains ahead of its competition and keeps itself positioned to win at least its fair share of this growth.
A must-do, but worth it
Much can change in 10 years, of course. In the meantime, $200 billion is a lot of money to spend… even for Alphabet. It’s not as if this is an ironclad, risk-free spending plan that will be painless to execute.
It’s a spending plan the company must execute, however, if for no other reason than because most of its competitors are spending similarly for the same reason. It will be worth it in the long run. It’s just got next to nothing to do with how many non-paying consumers are now regularly using the free version of Gemini.
