Big tech stocks have had a rough couple of months. Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) hasn’t escaped the sell-off and currently has a $3.5 trillion market cap after reaching $4.2 trillion earlier this year. That’s basically the equivalent of an ExxonMobil being erased from Alphabet’s market cap, so this is no small sell-off.
But is Alphabet stock worth buying now, or does it have more room to fall? Let’s take a look.
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Last year, Alphabet was practically left for dead by investors. There were questions surrounding the future of the Google Search platform and whether Alphabet could transition into this new age of artificial intelligence (AI). However, it seamlessly made the transition and has solidified the Google Search engine as one of the top ways the average person interacts with AI. Google’s generative AI platform, Gemini, is also one of the most used models out there and is winning the battle against several fierce competitors.
Its cloud computing platform, Google Cloud, is also growing at an incredible pace. In Q4, Google Cloud’s revenue rose 48% year over year — the fastest of any of the major cloud competitors. That’s because Google Cloud is becoming a popular place to build AI applications on, with one of the biggest factors being its custom chips, which can provide better cost performance for running AI applications.
Alphabet’s business is doing great, but if there’s one cause to tie the stock’s recent drop to, it’s Alphabet’s capital expenditure (capex) plans. For 2026, the company plans to spend between $175 billion and $185 billion in capex, mostly going toward data center construction. That’s a massive chunk of Alphabet’s cash flows, and investors are worried about what the return on investment will be.
However, Alphabet’s response would likely be that AI is too important a technological shift not to participate in. While investors may want to see Alphabet do something else with this money, I think this is the right move and will pay off over the long term.
In the meantime, Alphabet’s stock looks like a solid buy, as it’s trading at valuation levels not seen in several months.
At 25 times forward earnings, Alphabet isn’t necessarily “cheap,” as it still has a premium to the broader market. But, if you’ve been waiting to buy Alphabet stock, I think now is a perfect time to scoop up shares, although there are some better deals in the market available.
