In a tumultuous week for the tech industry, shares of Alphabet Inc. (GOOGL) faced significant pressure following President Donald Trump’s sweeping tariff announcement, which sparked a wave of risk-off sentiment across the broader U.S. market. As of market close on April 3, 2025, Alphabet’s stock is down over 20% year-to-date and approximately 28% below its 52-week high, officially putting it in bear market territory.
Adding to the turmoil, analysts from Jefferies reported that the current tariffs and related macroeconomic uncertainties could allow companies to reset their financial guidance. They labeled these conditions as a "free hall pass" for firms to lower their expectations, a move they believe could ultimately improve investor sentiment. In a note released on April 6, 2025, the analysts cut forecasts for 29 tech companies, including heavyweights like Meta, Microsoft, and Google.
For Alphabet, the situation is dire. Jefferies slashed its price target for Google by 5%, from $500 to $475, as the company’s stock trades at around $360, down 3.5% in the last five days. The analysts also reduced their 2025 earnings per share (EPS) estimates for Google by 2%, responding to the uncertain economic landscape. As the second quarter kicks off, Jefferies analysts noted that it likely represents a peak period of uncertainty, but they anticipate a potentially better second half of the year once expectations are reset.
Compounding Alphabet’s challenges is the fierce competition from generative artificial intelligence (AI) services like OpenAI’s ChatGPT and Elon Musk’s Grok, which are fundamentally reshaping how people search for information. The question investors are grappling with is whether these new tools represent a significant long-term threat to Alphabet’s core business of ad-driven search.
Google’s annual cloud computing conference, set for April 9 to April 11, is expected to highlight advancements in AI as the company seeks to bolster its cloud computing market share against rivals like Amazon and Microsoft. However, the increasing likelihood of a U.S. recession, exacerbated by tariffs, has raised concerns about spending on digital advertising, which is crucial for Alphabet’s revenue.
TD Cowen analyst John Blackledge commented that "macro headwinds could dampen overall ad spend growth through the remainder of 2025," noting that consumer sentiment is softening according to the Conference Board index. This sentiment is reflected in the market, where Alphabet stock has retreated about 23% in 2025, with institutional ownership waning.
On the product front, Alphabet agreed to acquire cybersecurity firm Wiz in an all-cash deal valued at $32 billion, raising questions about whether this move signals balance sheet strength or growing competitive weakness. Investors are left wondering if the acquisition will enhance Google’s cloud computing capabilities enough to compete effectively against Amazon and Microsoft.
In recent months, Alphabet has been under pressure from antitrust lawsuits filed by the Department of Justice, which scrutinize both its internet search and advertising businesses. The scrutiny has contributed to Alphabet’s stock decline and raised concerns about its future growth prospects.
Despite these challenges, Google remains the dominant search engine, commanding around 88% of the U.S. search market share. In Q4 2024, Alphabet reported $54 billion in revenue from its Search and Other sector, marking a 12.5% increase year-over-year, thanks in part to AI features like its new AI Overviews. However, some reports indicate an 8.9% decline in website clicks, prompting worries that AI-enhanced search may reduce traffic to external sites.
Google is not sitting idle; the company has revealed an aggressive $75 billion capital expenditure plan for 2025, a 43% increase from the previous year, aimed at scaling its AI and cloud infrastructure. This includes ramping up development on its Gemini AI models and investing in advanced data centers and hardware to ensure competitiveness in an AI-first world.
As Alphabet navigates these turbulent waters, the future of its core advertising engine remains uncertain. The rise of AI chatbots like ChatGPT offers a more straightforward alternative to traditional search engines, challenging Google’s long-standing business model. For younger users, the preference for speed and convenience over pages of links and ads represents a significant shift in user behavior.
In response to these changes, Google has begun deploying AI Overviews in the U.S., aiming to keep users engaged within its ecosystem by delivering AI-generated summaries alongside traditional search results. CEO Sundar Pichai has insisted that this new experience drives stronger usage and adapts to changing user behavior.
As of April 6, Alphabet stock holds a Relative Strength Rating of only 31 out of a best possible 99, indicating significant underperformance compared to its peers. Analysts see potential upside, with a 12-month stock price forecast of $209.13, representing a 43.63% upside from current levels.
However, whether Alphabet can maintain its grip on the search market as the definition of “search” evolves remains a critical question for investors. With fierce competition and shifting user preferences, Alphabet faces one of the biggest challenges in its history as generative AI reshapes how people find information online.
