Alphabet Stock Looks Like a Big Tech Bargain

Core Business Overview - Alphabet dominates online search and digital advertising, with YouTube accounting for nearly 10% of U.S. TV viewership and Google Cloud achieving a nearly $50 billion annual revenue run rate [1] - Despite solid revenue and profit growth, Alphabet's stock has underperformed compared to the S&P 500 and other tech giants like Microsoft, trading at less than 19 times forward earnings [2][3] - Alphabet has a significant cash reserve of around $96 billion and generated $34.5 billion in net income in Q1 2025, with Google search still responsible for over half of total revenue [12] Threats and Challenges - Alphabet faces antitrust lawsuits globally, with a federal judge siding with the U.S. Department of Justice regarding Google's illegal dominance in online advertising technology [5] - The potential divestiture of key assets like Chrome and Android could significantly impact Alphabet's advertising revenue [6] - The rise of AI-powered search tools poses a threat to Alphabet's core search business, with 42% of consumers finding traditional search engines less useful [7][8] Competitive Landscape - New entrants like OpenAI and Perplexity are offering AI-powered search products that challenge Google's traditional model [8][9] - Alphabet is responding with AI Overviews, which are AI-generated summaries appearing at the top of search results, indicating a shift in strategy to address the AI threat [10][11] - The company has developed its own AI models, such as Gemini, and is investing in AI to maintain its competitive edge [13]