Alphabet’s stock is nearing bear-market territory after falling more than 17% from its intraday high of $349.00 in early February. A 20% drop, which is the usual bear-market threshold, is now close. On Tuesday, the stock fell 3.9% in a single day, its biggest one-day drop since last June. This decline happened even as the broader Nasdaq and the Magnificent Seven index posted gains.
The recent selloff stands out because Alphabet was heading into 2025 with strong momentum. The stock jumped by more than 135% from its low on Liberation Day to its February peak, adding about $2.3 trillion in market value and becoming last year’s top-performing megacap. But in the past six weeks, that momentum has faded quickly. Now, traders are looking for a clear reason to buy a stock that until recently seemed protected from the broader shift away from tech.
The most credible pressure point is capital expenditure. The main concern is Alphabet’s capital spending, as the company could spend up to $185 billion on infrastructure this year—double its 2025 total. This planned capex could lead to negative free cash flow for the year, directly impacting Alphabet’s ability to generate excess cash. This large spending has made some big investors uneasy.
The near-term earnings outlook is uncertain. First-quarter results, due late April, are expected to show an 8% earnings decline, even as revenue rises by nearly 18% to nearly $107 billion. This reflects how AI infrastructure spending is squeezing margins. Most forecasts see slower earnings growth in 2026, with a return to robust double-digit gains over the next three years.
For traders seeking valuation entry points, the selloff has made Alphabet’s stock cheaper. Its price-to-earnings ratio is now about 26.8, down from 28.9 at the start of the year. This lower multiple looks more appealing, given Alphabet’s growth and unique strategy. The company is developing its own Trillium chips to train Gemini models, which reduces its reliance on external processors. This helps protect its profit margins and keeps data center projects on track. AI integration across search and YouTube supports double-digit revenue growth. Gemini-driven improvements in advertising yield and intent understanding reinforce, rather than cannibalize, the core monetization platform. One research analyst recently set a 12-month price target that implies a nearly 44% gain from current levels, citing Alphabet’s positioning across multiple durable AI-driven growth vectors. For active traders, the risk-reward profile is defined by the nearly 44% upside potential versus downside risk from current levels, a dynamic that will likely shape Alphabet’s price action in the first half of the year.
