Google Unveils Gemini 3.7 Flash, A Cheaper, Faster AI Model

Google, the tech giant under Alphabet Inc. (NASDAQ:GOOGL), has unveiled its latest AI model, Gemini 3.7 Flash, designed for coding and automated business tasks. The launch of this new AI model comes at a time when investors are closely watching the company’s progress in keeping pace with rivals like Anthropic and OpenAI, particularly with the flagship Gemini 3.5 Pro model still in the pipeline.

The new Gemini 3.7 Flash model has been priced at a competitive 75 cents per million input tokens and $3.75 per million output tokens through the end of the year, which is half the original cost of Gemini 3.6 Flash. This move is expected to attract developers and businesses looking to leverage AI for their automated tasks.

The Gemini 3.7 Flash model has shown improved performance on coding tasks, including debugging, issue resolution, and production-ready code generation. Google is also rolling out this new model immediately to Gemini Spark, its subscription AI agent service available in more than 160 countries.

This development comes on the same week that Alphabet closed a $25 billion bond sale and posted its first-ever negative free cash flow quarter. The company’s capital expenditures are now guided to $195 billion to $205 billion for 2026, up from $91 billion in 2025 and $53 billion in 2024.

Alphabet’s cloud business is converting AI investment into revenue, with its backlog climbing to $514 billion. The company expects to recognize a little more than half of this amount as revenue over the next 24 months. Alphabet also holds more than $240 billion in cash and marketable securities, giving it room to keep funding its buildout as free cash flow comes under pressure.

However, the company’s balance sheet is absorbing the cost of its fast-paced AI product cycle. The $25 billion bond sale closed on Monday, with notes due in 2028 to a $2.5 billion tranche not due until 2066. Much of this money funds servers and networking gear that Alphabet itself depreciates over about six years, meaning a large share of this year’s spending will need to be repaid all over again long before the longest bonds come due.

The tension investors are weighing right now is the gap between Alphabet’s forward P/E multiple of 16.86 and its price-to-free-cash-flow multiple of 79. This disparity is a result of the company’s negative free cash flow quarter and the pressure on its balance sheet.

While we acknowledge the potential of GOOGL as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk.