Alphabet’s stock is reportedly considered to be undervalued as investors wonder if artificial intelligence will take away some of its market share in search.
The Google parent company’s stock is down 16% this year, is underperforming other AI stocks like Microsoft and Meta, and is the cheapest among the Magnificent Seven companies, Bloomberg reported Thursday (April 10).
Investors are concerned that Alphabet’s dominance in search means it has nowhere to go but down, that the company has fallen behind its competitors in AI, that it is making substantial investments in AI, and that younger consumers are using AI services rather than traditional search, according to the report.
Since January 2023, around the time OpenAI’s ChatGPT appeared, Alphabet’s share of the global market for search engines has slid from 92.9% to 89.6%, the report said.
At the same time, Alphabet has several strengths that suggest its stock is undervalued, the report said.
Its ad business is not as exposed to tariff risk as other businesses, its revenue is expected to grow about 16% this year, and its wide range of businesses includes not only search and AI but also things like media and autonomous vehicles, per the report.
It was reported in February that investors were questioning the amount Alphabet is spending on AI. The company is estimated to have spent $50 billion on the technology in 2024 and is expected to spend more in 2025.
A combination of elevated investment in AI and challenges to revenue growth — such as the launch of low-cost AI models by DeepSeek — led to scrutiny by investors.
In December, it was reported that Google CEO Sundar Pichai told the tech giant’s employees that “2025 will be critical.”
“I think it’s really important we internalize the urgency of this moment and need to move faster as a company,” Pichai said. “The stakes are high. These are disruptive moments. In 2025, we need to be relentlessly focused on unlocking the benefits of this technology and solve real user problems.”
The pressures facing Google include challenges to its search ads and cloud services businesses, increased competition and regulation.
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