Down 16%, should you buy dipping sauce on letters?

By shrinking it is obvious letter (NASDAQ: GOOGL) (NASDAQ: GOOG) It has always been a huge winner for investors. Stocks have soared 144% over the past five years and 525% over the past decade. Becoming a dominant Internet company has led to some very happy shareholders.

However, as of the May 28 writing, the top technology stock was trading below its high price, and the stock reached on February 4. Should you take advantage of the pessimism of the market and buy letter inclinations?

Image source: letters.

With the proliferation of generative artificial intelligence (AI) tools in recent years, investors are rightfully worried that letters of Crown Jewelry Google Search accounted for 56% of first-quarter sales in searches. This is because it is believed that when looking for information about various topics, users will turn more to AI, thereby absorbing traffic from Google searches. This, in turn, can have a negative impact on advertising revenue.

So far, these fears seem to be exaggerated. First, Google search still accounts for 90% of the world market share About search engines. Additionally, Google Search's revenue in the first quarter increased by 10% year-on-year. $50.7 billion in sales increased by 28% from the same period three years ago.

Finally, it is worth pointing out that the letters are not put on the laurels. The company clearly puts artificial intelligence at the forefront. Alphabet was not disappointing at the annual Google I/O Developers Conference in May. 100 obvious updates have been announced, with new AI capabilities spread across the board.

Alphabet is already looking for ways to make money from AI. "Overall, for AI overview, we will continue to see monetization at roughly the same interest rate," Chief Business Officer Philipp Schindler said on the 2025 earnings call in the quarter 1.

On the advertiser side, AI is helping them create more effective marketing campaigns to increase returns on spending and enhance their target capabilities.

In the first quarter, letters generated $34.5 billion in net revenue. This puts it in an enviable position, reserving a large amount of fiscal resources into the AI ​​initiative to enhance its competitive position.

Letter width Economic moat It is a key factor that highlights the outstanding performance of this business. The company benefits from strong web effects in search and YouTube. Have valuable, intangible assets such as letters and Google brands, unrivalled technical knowledge and the ability to collect incredible data that can directly influence strategic decisions.

There is also a cost advantage, especially Google Cloud. The platform requires huge fixed costs to build the infrastructure. This explains why the segment has long been unprofitable. But now that revenue has reached $49 billion in annual operating rates in the first quarter, Google Cloud is improving its bottom line. In the first three months of 2025, operating income totaled US$2.2 billion.

Google Cloud customers also handle high conversion costs. Once they join and start relying on letters as their mission-critical IT partners, they tend to stay the same unless they want to cause potential operational disruptions.

Investors will notice that the valuation of letters is too difficult to ignore. The value (p/e) ratio of stock trade is 19.2. This is right S&P 500 Indexconsidering the quality of this business, this doesn't seem to be needed. and allSeven“Stocks, letters are the cheapest.

Finding so many things in the stock market can make investors think they are overlooking something. However, it is best not to over-analyze the situation. Alphabet is a wise purchase when sagging.

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Alphabet executive Suzanne Frey is a member of the board of directors of Motley Fool. Neil Patel has no position in any of the stocks mentioned. Motley fool has a place and recommends letters. Motley Fool has a disclosure policy.

Down 16%, should you buy dipping sauce on letters? Originally published by Motley Fool