Alphabet stock down 12% this year, facing competition from AI, but undervalued and poised for growth.

From Yahoo Finance: 2025-05-18 18:30:00

Alphabet stock is down 12% in 2025, underperforming Nasdaq Composite. Concerns arise about Google’s search dominance due to AI models like ChatGPT and Perplexity. Paid clicks only increased 2% last quarter. Despite this, Google’s AI capabilities might be underestimated, with Gemini leading in AI models and revenue growing 14% year over year.

Competition from AI models like ChatGPT and Perplexity poses a threat to Google’s search dominance. Reports of Apple’s declining Google Search volumes due to AI led to a sharp drop in Alphabet stock. While some worry about Google’s competitive position, the company asserts continued query growth in Search. Google’s AI infrastructure and data centers give it a strong advantage.

Despite increased competition, Alphabet’s stock seems undervalued. The company’s full-stack AI approach and strong financial results position it for growth. Analysts project a 15% annualized earnings growth rate. Google’s ecosystem, including Gmail and YouTube, provides a competitive edge. Investors should consider Google’s long-term potential amid AI threats and market dynamics.

Read more: Down 12% This Year, Should You Buy Alphabet Stock?