Is Alphabet a Generational Buying Opportunity at These Levels?

Key Points

• Alphabet is down over 23% YTD and more than 30% from its highs, as broader market volatility, rising tariffs, and geopolitical tensions fuel a tech selloff.
• GOOGL is trading at a rare valuation discount, with a P/E well below its 10-year average, despite steady earnings and 14% revenue growth in 2024.
• While Alphabet faces rising generative AI competition and margin pressures, its dominant position in search and strong fundamentals might offer a compelling long-term buying opportunity.

Alongside the broader market sell-off, shares of Alphabet NASDAQ: GOOGL, Google's parent company, have taken a sharp hit in 2025. As of Tuesday’s close, the tech giant has dropped around 23.5% year-to-date and now sits more than 30% below its 52-week high, firmly in bear market territory.

Alphabet's slide isn't isolated from the broader market or other Magnificent Seven stocks. While the company faces its own headwinds, the steep drop comes amid a broader market correction sparked by significant trade tensions, rising tariffs, and geopolitical uncertainty. 

This week’s catalyst: the administration’s implementation of further steep tariffs on China after Tuesday’s missed deadline, triggering a sell-off across U.S. and global equities. The CBOE Volatility Index (VIX), Wall Street’s fear and uncertainty gauge, is now back at levels not seen since 2020 and, more recently, in August of last year during the Yen carry trade unwind debacle, reinforcing a central risk-off tone across markets.

Yet, with Alphabet’s fundamentals still intact and its valuation reaching multi-year lows, long-term investors are starting to ask: Is GOOGL becoming too cheap to ignore?

A Historically Low Valuation

Over the past decade, Alphabet has typically traded at a price-to-earnings (P/E) ratio of around 28. As of April 8, GOOGL’s current P/E has plunged to 17.98, well below its 10-year average. More compelling is the stock’s forward P/E of just 14.23, a level rarely seen in Alphabet’s history.

This sharp compression in valuation reflects broader market fear and aggressive multiple repricing across tech. However, if Alphabet's earnings continue to grow, it could also potentially signal an opportunity.

This could be a justified reset if earnings were expected to fall significantly. However, if Alphabet’s revenue and profits remain on track, the market may be severely underpricing one of the world's most dominant tech platforms.

GOOGL's Earnings Still Holding Up

Alphabet’s recent earnings, reported February 4, showed signs of resilience. For Q4 2024, the company reported revenue of $96.47 billion, just shy of the $96.56 billion consensus. Earnings per share came in at $2.15, slightly beating the $2.13 estimate. Notably, YouTube's ad revenue outperformed expectations at $10.47 billion, while search remained strong.

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However, Google Cloud, a key growth segment,  grew 30% year-over-year to $11.96 billion but missed forecasts, reflecting capacity constraints in AI infrastructure. Alphabet’s $75 billion capital expenditure plan for 2025, well above the expected $58.84 billion, also raised some eyebrows. While it underscores their AI ambitions, it has sparked concerns about profitability and margin compression.

Still, total annual revenue grew 14% to $350 billion in 2024, hardly a sign of a declining company.

The Generative AI Threat

Alphabet’s core business, search, is increasingly threatened by generative AI. OpenAI’s ChatGPT disrupted how people consume and interact with information, and that shift could eventually erode Google’s search dominance.

Google has responded with Gemini and AI Overviews, integrating generative AI directly into search results. However, whether these tools can match the intuitive and interactive experience users get from rivals remains an open question. Competition from OpenAI, Grok, and others has made this a critical turning point in Alphabet’s history.

The company still holds a dominant position in global search and advertising, but investor confidence hinges on whether it can maintain that lead as user behavior changes rapidly.

A Rare Buying Opportunity? Alphabet’s AI Strategy Is Critical

Alphabet faces challenges: a high-spending roadmap, pressure on cloud margins, and the potential competition threat of generative AI. Add in heightened market volatility from trade wars and macro uncertainty, and it’s no surprise the stock has struggled.

But beneath that turmoil is a cash-rich company with a dominant market share, still growing revenue, and trading at one of the lowest valuations in its history.

If Alphabet can execute its AI strategy and continue growing earnings, the current dip could mark a rare generational buying opportunity for long-term investors willing to weather the near-term volatility.