Google Gemini 3.5 Looks Like a Legit Flex, Yet Alphabet Stock Keeps Slipping — Is This a Glorious Buying Opportunity?

Joey FrenetteWed, May 27, 2026 at 2:58 PM UTC

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Stocks: iShares Semiconductor ETF (SOXX) continues rallying; Alphabet (GOOG) unveiled Gemini 3.5 Flash, but the stock is down ~4% from highs at ~30x trailing P/E, with Gemini 3.5 Pro arriving in June.

Google seems to be pushing aggressive token consumption through advanced AI agents and multimodal models despite uncertainty over ROI.

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The AI trade is really starting to take off, but much of the gains, at least of late, have been concentrated within the same old, same old. The semiconductor trade has continued to melt up at a staggering pace. Just when you thought that the trade was going to implode and Dr. Michael Burry, who's betting against the iShares Semiconductor ETF (NASDAQ:SOXX) with bearish put options, would fall into the money, the index went on to keep defying the laws of gravity. Meanwhile, some of the most improved innovators at the frontier, which include Alphabet (NASDAQ:GOOG), have begun to slow down a bit.

Sure, the AI chips layer stands to win as token consumption goes through the roof. And after a packed Google I/O event, I think the big takeaway is that we're going to need a heck of a lot more tokens to power the kinds of innovations coming down the pipeline. So much for stepping back from AI to focus on greater efficiencies.

I/O 2026 was packed, but Alphabet shares are slipping

So, the big question is whether the rise of always-on agents, advanced multimodal and world models, and autonomous coding sub-agents will cause a steepening of the token take-off, or if firms are going to start taking a step back from the more "expensive" AI applications, so that CapEx can be reined in and the hyperscaler spenders can course correct and probably cause an investor rotation from the hardware layer, which has been the obvious trade for quite some time, towards the hyperscalers.

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It's tough to tell, but count me as unsurprised if some of the hyperscalers start re-evaluating their AI strategies a bit differently.

Alphabet's foot is very much on the gas pedal. And while nobody knows if users will embrace a game-changer like Generative UX, which might be an absolute token hog that might weigh down ROIs, I do think that Alphabet can easily roll back and course correct.

At the end of the day, Alphabet is a firm that has the agility to floor it or to move into the middle lane of the freeway where it can lift the weight off the pedal a bit.

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For now, it's full speed ahead for Alphabet as Gemini Spark agents, Gemini 3.5, and big AI-driven changes to Search change how investors view the firm. While I might be a bit more skeptical about some of the more intensive innovations to come from the Google AI pipeline, I do think that Google is also covering its "efficiency" base very well.

Gemini 3.5 Flash — what a speed boost!

For instance, Gemini 3.5 Flash is seriously impressive not only from a performance perspective but also in terms of speed and token efficiency. The model is around four times faster than pro models, like Gemini 3.1 Pro, while delivering more smarts in some key areas. I don't know about you, but that's a game-changer for users who've grown accustomed to waiting more than 10 seconds for their pro-level prompt to process, or for those looking to stick to a token budget.

As Google's eighth-generation TPUs also become more efficient (reportedly offering 80% performance-per-dollar improvement), perhaps we could be entering an era where unbelievable smarts come nearly instantaneously. Given how rapidly Gemini and TPUs are moving on the advancement curve, perhaps it's not too far-fetched to think that tokens could become magnitudes cheaper and more abundant than ever in a few years' time.

In that scenario, perhaps not "flooring it" on AI might be the riskier move, given the early rewards for firms that lead the way into new markets. For now, "tokenmaxxing" might lead to questionable ROI, but could things change in just a few years?

Time will tell. Either way, Google has the optionality that few other firms have. And my guess is that Google will continue to get a "free pass" from investors should it keep raising the bar on CapEx moving forward.

The bottom line

The stock is off close to 4% from its high, as investors digest what they just saw at I/O 2026. I think it might be a huge opportunity for long-term investors who want to catch the name for less than 30.0 times trailing price-to-earnings (P/E).

As investors await Gemini 3.5 Pro (coming in June) and Spark (gradual rollout in the coming months), Alphabet has no shortage of catalysts for hopeful buyers of the latest (minor) dip.

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