Google (NASDAQ:GOOGL) parent Alphabet (NASDAQ:GOOG) saw its shares plummet this week following Apple’s (NASDAQ:AAPL) revelation about exploring AI-powered search alternatives. With the stock now trading significantly below analyst targets, it can be worth weighing whether this represents a buying opportunity or the beginning of a serious competitive threat to Google’s core business model. Let’s take a look!
Google’s Recent Stock Slide After Apple AI Search Plans Revealed
Alphabet shares tumbled as much as 7% on Wednesday after Apple’s senior vice president of services, Eddy Cue, testified in court that the company is “actively exploring” a shift toward AI-powered search in its Safari browser.
This marked Alphabet’s biggest single-day drop in weeks, bringing the stock to its lowest point since April. Cue explicitly stated his belief that AI search providers like OpenAI, Perplexity AI, and Anthropic will eventually replace traditional search engines like Google, noting that Safari browser searches declined for the first time last month as users increasingly turned to AI alternatives.
The testimony came during the US Justice Department’s antitrust lawsuit against Alphabet, which centers on Google’s estimated $20 billion annual deal, making it the default search engine in Safari. This arrangement has been a cornerstone of Google’s dominance in search, with iPhone users representing a significant portion of Google’s search traffic and advertising revenue.
Despite the market reaction, Cue admitted he still believes Google should remain Safari’s default search engine due to superior financial terms, revealing he has “lost sleep over the possibility of losing the revenue share” from the Google agreement.
Why Google is Likely in a ‘Buy the Dip’ Moment
Despite the market’s negative reaction, several factors suggest Google’s position remains strong. The company maintains its dominant position in internet search with powerful voice and visual search capabilities that continue to evolve.
Google has been aggressively investing in AI development, leveraging its vast data resources and substantial cash reserves. Earlier this year, it launched an “AI mode” on its search page to retain users potentially drawn to ChatGPT, and recently expanded its AI-generated summaries to over 100 countries while beginning to place ads in these summaries to bolster revenue.
Following Wednesday’s sharp decline, Alphabet shares now appear significantly undervalued.
According to multiple valuation models, the stock’s fair value is approximately $183, suggesting a 21% upside from recent prices. Analysts are even more optimistic, with an average target price of $201.92, indicating potential upside of over 33%. The company’s financial health remains robust with a profit margin of 30.86%, return on equity of 34.79%, and substantial cash reserves of $95.33 billion.
With strong cash flow health and profitability metrics, Google appears well-positioned to weather competitive threats while continuing to invest in its AI capabilities. The recent drop, viewed against Google’s long-term performance and financial strength, potentially presents a strategic entry point for investors looking beyond short-term volatility.
Google Stock Brief (as of 7:00 AM EDT, May 9, 2025)
Alphabet is currently trading at approximately $156.57 in pre-market, up 0.53% from yesterday’s close of $155.75. The stock has traded in a 52-week range of $142.66 to $208.70, with current levels representing a significant decline from its yearly high.
Market capitalization stands at $1.88 trillion, reflecting Alphabet’s position as one of the world’s most valuable technology companies. Key metrics show a trailing P/E ratio of 17.38, forward P/E of 16.56, and a price-to-sales ratio of 5.31. Year-to-date performance has been challenging, with shares down 18.12%, substantially underperforming the S&P 500’s 3.70% decline.
Despite recent turbulence, the stock maintains strong analyst support, with most ratings in the “Buy” to “Strong Buy” range and an average price target of $200.60. Alphabet continues to generate impressive financial results with $359.71 billion in trailing twelve-month revenue, $111 billion in net income, and diluted EPS of $8.96.
The company’s earnings consistency remains notable, with quarterly earnings exceeding expectations for three consecutive quarters.
While AI competition poses legitimate concerns, Alphabet’s diversified business model—spanning search, cloud computing, YouTube, and various “moonshot” investments—provides multiple avenues for growth beyond its core search business.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
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