The Nasdaq Composite’s impressive two-year rally hit a wall in recent months, with the index down over 13% since its peak and officially in correction mode. A major culprit? Tech stocks, which have broadly stumbled. Yet amid the sell-off, one AI-driven giant is looking increasingly attractive: Alphabet (GOOGL).
Nasdaq’s Correction Hits Tech Hard
It’s been a rough stretch for the tech-heavy Nasdaq. The index, which hit an all-time high less than three months ago, has seen a sharp reversal. So far in 2025, it’s down 9%, mirroring a broader retreat among technology stocks.
Among the “Magnificent Seven”—the market’s biggest tech names—Meta Platforms is the only stock in positive territory this year. That tells the story of a sector struggling to regain its footing after years of AI-fueled enthusiasm.
And yet, corrections often present opportunities. Alphabet, a long-time leader in AI innovation, is now trading at levels that could tempt long-term investors.
Alphabet’s Deep AI Expertise Gives It an Edge
While many companies are scrambling to integrate AI, Alphabet has been investing in the technology for years. DeepMind, its AI research arm, has pioneered advancements in machine learning, deep learning frameworks, and reinforcement learning.
- DeepMind played a crucial role in the development of Gemini, Alphabet’s advanced AI model.
- Unlike competitors relying on third-party AI tools, Alphabet has built its models in-house, giving it control over innovation and cost.
- AI-related investments are expected to surge further in 2025, as Alphabet doubles down on growth areas.
DeepMind doesn’t get the same headlines as OpenAI or other flashy AI ventures, but it’s been a quiet force in shaping the company’s AI leadership. That edge could prove valuable as competition intensifies.
Capital Expenditures Signal Major AI Investment
Alphabet’s spending on AI and infrastructure is staggering. In 2024, the company poured $52 billion into capital expenditures. This year, that figure is projected to hit $75 billion—a 130% increase from just two years ago.
| Year | Alphabet’s Capital Expenditures |
|---|---|
| 2023 | $32.6 billion |
| 2024 | $52 billion |
| 2025 (Projected) | $75 billion |
While massive spending doesn’t always translate into success, it underscores Alphabet’s aggressive push into AI. CEO Sundar Pichai has emphasized AI as a top priority, and investors should expect a significant chunk of this year’s spending to go toward advancing its AI capabilities.
Google Cloud Gains Traction Amid AI Boom
Google Cloud has long played second fiddle to Amazon Web Services (AWS) and Microsoft Azure, but it’s finally starting to carve out a stronger position. Over the past seven years, its market share has doubled to 12%, far outpacing smaller rivals like Alibaba Cloud.
- In Q4 2024, Google Cloud reported $12 billion in revenue, a 30% year-over-year jump.
- The platform now accounts for 12% of Alphabet’s total revenue—up from just 5% five years ago.
- AI-powered features have been a key growth driver, with stronger customer demand boosting financial results.
While Google Search remains Alphabet’s cash cow—making up 56% of Q4 revenue—the rise of Google Cloud suggests the company is successfully diversifying its revenue streams. That’s a crucial step for long-term stability.
Alphabet’s Valuation Makes It a Compelling Buy
Tech stocks often command hefty price-to-earnings (P/E) ratios, especially those tied to high-growth sectors like AI. Alphabet was no exception, trading at nearly 34 times earnings just a few months ago. But after its recent pullback, the stock is now trading at a much more attractive valuation—just over 20 times earnings.
For a company of Alphabet’s scale and innovation potential, that’s an appealing entry point.
The Nasdaq’s correction has put pressure on tech stocks across the board, but long-term investors may see this as a chance to pick up Alphabet at a discount. If AI spending continues at its current pace and Google Cloud keeps gaining ground, today’s prices could look like a bargain in hindsight.
