UBS bullish on Alphabet Inc. Class C (GOOGL.US) as "leading AI platform": Gemini has narrowed the gap with ChatGPT and AI monetization channels are expanding further.

Alphabet Inc. Class C(GOOGL.US) released the AI model Gemini 3 in November last year, reigniting investors, businesses, and the broader tech community's enthusiasm for this tech giant. Although OpenAI's ChatGPT still leads Gemini in terms of usage scale, BNP Paribas believes that the gap between the two is rapidly closing. BNP Paribas analyst Nick Jones cited third-party data, stating, "In December last year, Gemini's share of website traffic and monthly active users on the app increased from 17.7% and 11.7% in November to 22.5% and 13.2% in December 2024." He added that the launch of Gemini 3 in November last year seemed to be a "key catalyst" for user growth and he was "excited" about the growth of Alphabet Inc. Class C. He also pointed out that this tech giant is becoming a "dominant AI platform," which has significant implications for OpenAI and Meta (META.US), especially considering Meta AI's "very low user adoption rate." He also emphasized that Gemini 3 Flash, launched globally last month, is now integrated into the search AI model, which is a positive development for this tech giant and supports their view that Alphabet Inc. Class C has multiple AI monetization channels. OpenAI is facing increasingly strong competition. Data from Similarweb shows that since the release of Gemini 3 Pro, its web traffic has continued to rise, while ChatGPT's web traffic has declined. In December last year, Gemini's traffic increased by 28.4% month-on-month, while ChatGPT's traffic decreased by 5.6%. However, it is important to note that this data only reflects the visitation of the two websites chatgpt.com and gemini.google.com and does not include the usage of the two products' consumer-level applications or other integrated scenarios (such as the AI Overview feature in Alphabet Inc. Class C search). Although OpenAI still holds a significant advantage in terms of usage scale, they have realized the "significant threat" posed by Alphabet Inc. Class C. In early December last year, OpenAI CEO Sam Altman issued a "code red" internal warning, requesting the company to suspend several sideline projects, including the Sora video generation project, for about eight weeks to focus on improving ChatGPT in response to the increasingly intense competition. He believes that in order to ensure the survival of OpenAI, the company must prioritize user satisfaction above their initial goal of achieving artificial general intelligence (AGI). Altman warned employees internally that Alphabet Inc. Class C's strong reentry into the AI field could bring "short-term economic pressure" to OpenAI. Despite having vast investments and a first-mover advantage, Altman admitted that Alphabet Inc. Class C still makes him fearful. He pointed out that although Alphabet Inc. Class C experienced its own "code red" crisis when ChatGPT was launched and initially did not pay enough attention to OpenAI, this does not change the fact that they are a "very powerful company." Altman believes that Alphabet Inc. Class C's deep technological capabilities and resource reserves make them the top rival that OpenAI cannot ignore. Altman also predicted that in order to maintain their leading position in the industry, OpenAI may issue "code red" warnings once or twice a year for a long time to come. For him, this high-intensity crisis response mechanism is not occasional, but a part of the company's normal operations. Some analysts had previously predicted that Alphabet Inc. Class C and Anthropic will continue to weaken OpenAI's leading position. Mike O'Rourke, Chief Market Strategist at JonesTrading, said, "Given the scale, industry position, and first-mover advantage of Alphabet Inc. Class C in the search field, Gemini may take market share, causing OpenAI and other companies to lag behind." AI industry veteran scientist Gary Marcus has a more pointed view, stating, "OpenAI has basically squandered the technological lead it once had. Alphabet Inc. Class C has caught up."