Morningstar

Alphabet: Gemini 4 Argon Launch Brings Alphabet Back to the Frontier Model Race

We still believe that the market is underestimating Alphabet’s full-stack artificial intelligence opportunity and see shares as undervalued.

Monochromatic Google logo displayed on wall
Jeremy Moeller via Getty

Key Morningstar Metrics for Alphabet Inc Class C

  • Fair Value Estimate
    : $433
  • Morningstar Rating
    : ★★★★
  • Morningstar Economic Moat Rating
    : Wide
  • Morningstar Uncertainty Rating
    : Medium

Alphabet unveiled Gemini 4 Argon, a frontier large language model that leads or ties competing models by OpenAI and Anthropic across a variety of industry benchmarks. Gemini 4’s rollout will begin with vetted cyber defenders before all users get access. Alphabet shares rose after hours on Sept. 30.

Why it matters: After slipping from the frontier, with Gemini 3.1 Pro last being close to the frontier almost 10 months ago, investors were beginning to question Alphabet’s ability to produce a frontier-class model. We believe Gemini 4’s launch should quell some of those concerns.

  • The clearest improvement in Gemini 4 appears to be in agentic coding, with long-horizon software engineering benchmarks showing a clear upgrade from the previous Gemini 3.8 Flash model, bringing it loosely in line with models by Anthropic and OpenAI.
  • Alphabet is also pricing Gemini 4 quite attractively, with introductory pricing significantly lower than frontier models by Anthropic and OpenAI. We see this introductory pricing as a clear signal that Alphabet wants to ramp adoption of its models that has lagged its peers’ adoption this year.

The bottom line: We maintain our $433 fair value estimate for wide-moat Alphabet, with a return to the frontier and strong adoption of Gemini factored into our base case. We still believe that the market is underestimating Alphabet’s full-stack artificial intelligence opportunity and see shares as undervalued.

  • If Gemini 4, and models that follow, are able to drive adoption of Alphabet’s AI models, we see more upside to our fair value, as serving internal models to customers, in our estimates, is a more profitable use of compute than renting capacity to external model providers.
  • At the same time, however, we believe Alphabet is spreading its AI bets intelligently, with compute deals with Anthropic ensuring that the firm’s cloud business continues to grow strongly even if it stumbles on the model layer.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

Sponsor Center