Alphabet's Stock Plunges Amid Market Sell-Off and Trade Tensions

Alphabet (GOOGL) has seen its stock drop over 23.5% in 2025 amid market turmoil and trade tensions. Despite a low P/E ratio and consistent revenues, concerns about AI competition and high capital expenditures persist. Is this the dip investors should seize?

Date: 11-04-2025

AI Rating: 7

**Market Overview and Stock Performance**
Alphabet (GOOGL) is currently enduring a significant decline in stock price, having dropped over 23.5% year-to-date, and is now more than 30% below its 52-week high. This downturn is largely attributed to a broader market sell-off, driven by escalating trade tensions, rising tariffs, and geopolitical uncertainties that have instigated a risk-off mentality among investors.

**Valuation Insights**
Notably, Alphabet's price-to-earnings (P/E) ratio has plummeted to 17.98, which is considerably lower than its 10-year average of approximately 28. Furthermore, the forward P/E stands at only 14.23. This sharp decline in valuation indicates a significant market fear and a potential mispricing of Alphabet's stock, considering the company's continued revenue growth and intact fundamentals.

**Earnings Performance**
In its recent earnings report for Q4 2024, Alphabet posted a revenue of $96.47 billion, narrowly missing expectations but still reflecting a strong overall performance with a total annual revenue growth of 14% to $350 billion. Importantly, Alphabet's earnings per share (EPS) of $2.15 slightly surpassed the $2.13 estimate, showcasing its ability to maintain profitability amid challenging conditions.

**Future Outlook and Risks**
One significant concern for investors is the pressure on Google Cloud, which, despite achieving impressive 30% year-over-year growth to $11.96 billion, missed earnings forecasts, highlighting potential capacity constraints in its AI infrastructure. Additionally, Alphabet's capital expenditure plan for 2025 is set at $75 billion, significantly higher than expected. This raises concerns regarding profitability and profit margins, leading to skepticism among investors over the long-term sustainability of its growth.

Furthermore, the increasing threat posed by generative AI technologies could jeopardize Alphabet's core search business. The introduction of competitors like OpenAI's ChatGPT has shifted user behavior, challenging Google’s longstanding dominance in the search space.

Despite these challenges, Alphabet remains a cash-rich company and continues to dominate global search and advertising markets. For long-term investors, the steep valuation could signal a compelling buying opportunity if Alphabet successfully executes its AI strategy moving forward.

Stocks: GOOGL