Four of Google's Top AI Researchers Just Left to Start One Company. Alphabet Is Investing in It.

Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) said Wednesday that Jeff Dean, Google's chief scientist and a 27-year veteran of the company, is leaving. And he isn't leaving alone.

Sanjay Ghemawat, a Google senior fellow and Dean's engineering partner of more than two decades, is going with him. So are Oriol Vinyals, a co-lead of the company's Gemini models, and Quoc Le, a founding member of the Google Brain team.

The four are starting Discovery Loop, a public benefit corporation that plans to use artificial intelligence (AI) to automate scientific and engineering research. Investors treated the news as a loss. Shares of the search giant fell about 4% Wednesday, erasing about $185 billion of market value.

But this isn't an ordinary talent departure. Alphabet is investing in the new company, and Google will be its cloud partner. So, how worried should shareholders be when four of the company's most senior AI minds leave on the same day -- with their employer's blessing?

Image source: Alphabet Inc.

What Alphabet is losing, and what it keeps

Dean joined Google in 1999 and, with Ghemawat, built much of the technical foundation the company still runs on, from its early search infrastructure to the neural networks behind its AI models.

"After an incredible 27-year run, Jeff Dean is at a moment where he wants to try something new, and we're excited to support him in that," CEO Sundar Pichai said in a blog post announcing the changes.

The Gemini departures could matter even more. Vinyals co-led the company's flagship AI models, and Dean was the effort's overall co-technical lead. In other words, senior leadership of the model program turned over in a single day, in the middle of an AI race.

Alphabet, however, moved to contain the disruption. Demis Hassabis, who has led Google DeepMind since Google acquired his lab in 2014, becomes the unit's chair and Alphabet's chief scientist. He also continues to run Isomorphic Labs, the company's AI drug-discovery business.

Meanwhile, Koray Kavukcuoglu, DeepMind's longtime technology chief, takes over the unit's day-to-day operations as a senior vice president reporting directly to Pichai. He now leads development of Gemini 4, the company's next major model. He has been at the lab for 13 years.

And the relationship with the founders continues. Discovery Loop's seed round is co-led by Radical Ventures and Khosla Ventures, with Alphabet among the participating investors. If the start-up's research pans out, Alphabet owns a piece of it -- and sells it computing capacity along the way.

The business they're leaving behind

The departures land on a business that is compounding, not struggling. Alphabet's second-quarter revenue rose 24% year over year to $119.8 billion, the company's 12th consecutive quarter of double-digit growth. Operating income climbed 30%, putting the quarter's operating margin at 34%, up 2 percentage points from a year earlier.

Google Cloud is the growth engine. The segment's revenue reached $24.8 billion last quarter, and its growth has accelerated for two straight quarters, from 32% a year ago to 63% in the first quarter to 82% now. Cloud's operating income more than tripled year over year to $8.8 billion.

That growth is expensive, though. Alphabet raised its 2026 capital expenditure plan to a range of $195 billion to $205 billion, from $180 billion to $190 billion before. The spending is heavy enough that the company's free cash flow turned negative last quarter for the first time on record.

The researchers who just left helped build the models all that capacity serves, which is arguably why the market took their exit so hard.

Of course, I never thought the case for the stock rested on four people. The customer relationships, the data, and the research organization around them stay. Hassabis remains in the building, and a 13-year veteran now runs the lab.

Valuation hasn't changed much, either. At about $362 per share as of this writing, the stock trades at about 27 times forward earnings. That's a premium price for a company this size. But it's attached to 24% revenue growth and a cloud segment compounding at 82%, and growth like that can arguably support it.

So, does losing four researchers, even four of this caliber, change whether the stock is worth owning? I don't think so, and I'm not treating it as a reason to sell.

After all, the growth here comes from advertising and demand for cloud computing capacity, and both were still growing as of the company's July report -- cloud at an accelerating pace. If Gemini 4 slips under its new leadership, I'd take a fresh look at the concern. So far, that hasn't happened.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.