Alphabet's Stock Shaken by Increased AI Investment… "Now the Most Undervalued Large-Cap AI Stock"

▲ Alphabet's Google (GOOG) / Source: X ©

Alphabet's stock price has undergone an adjustment this year due to the burden of large-scale AI investments, but considering its solid performance and cloud growth, its current corporate value is deemed excessively low. The market analyzes that while investment costs are a short-term burden, in the long term, AI competitiveness could lead to a re-evaluation of the stock price.

According to cryptocurrency specialized media Watcher.guru on July 4 (local time), Alphabet revised its 2026 capital expenditure (Capex) guidance upwards from the previous $175 billion-$185 billion to $180 billion-$190 billion. It also announced a large-scale capital increase plan exceeding $80 billion, raising concerns about dilution for existing shareholders, and this burden was identified as a major reason for the recent stock price decline. However, Berkshire Hathaway's decision to make an anchor investment of $10 billion alleviated some concerns.

In addition, the departure of key talent and regulatory risks also pressured investor sentiment. Noam Shazeer, VP of Engineering, moved to OpenAI, and John Jumper, VP of DeepMind, moved to Anthropic. Furthermore, a Swedish court ruled that Alphabet must pay approximately $2 billion to Klarna in damages related to search ranking operations, and an antitrust lawsuit related to its search business in the U.S. is also ongoing.

Nevertheless, performance remained strong. Alphabet's forward price-to-earnings ratio (PER) was approximately 26.9x, and its net profit margin recorded about 38%. Free cash flow exceeded $38 billion, and Q1 2026 revenue increased by 22% year-over-year to $109.9 billion, showing the fastest growth in the last two years. Earnings per share (EPS) were $5.11, significantly exceeding market expectations. Contrary to concerns about the spread of generative AI, the search business maintained solid growth, with search and other segment revenues increasing by 19% year-over-year to $60.4 billion. CEO Sundar Pichai stated, "AI investments are driving growth across the business, and Gemini is now processing over 16 billion tokens per minute."

The cloud business also emerged as a key growth driver. Google Cloud revenue reached $20 billion, an increase of 63% year-over-year, outpacing Microsoft Azure and Amazon Web Services (AWS). Furthermore, through TPU collaboration with Blackstone and a chip leasing agreement with Anthropic, Alphabet secured an order backlog of $460 billion. Its inclusion in the Dow Jones Industrial Average this year and the development of the Willow quantum chip were also evaluated as long-term competitive advantages. The media maintained that while large-scale AI investments and regulatory risks remain short-term burdens, considering the current valuation and performance, Alphabet is the most undervalued stock among large-cap AI stocks.

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