What happened

Shares of Google parent Alphabet (GOOGL -1.97%) (GOOG -1.96%) took a 24.8% header during the first half of 2022, according to data from S&P Global Market Intelligence.

When looking back at the chart to all-time highs of autumn 2021, Alphabet is off 28% from its peak. By comparison, the S&P 500 and Nasdaq Composite indexes are off 21% and 31%, respectively, from their all-time highs.  

So what

A confluence of events conspired to drag down the mighty Alphabet's stock -- and few of those events had much to do with business results. What started as a healthy market pullback early in 2022 widened into all-out carnage as inflation soared past 8% year over year, driven by higher energy, food, auto, and home prices.

In response, the Federal Reserve has started aggressively raising interest rates in an attempt to cool off the economy, which in turn would cool off prices. As a reminder, higher interest rates lower the present value of risk assets like stocks.  

Thus far, the Fed's plan has done little to tame inflation, but it has pushed the economy to what some economists think is the brink of recession. Add in Russia's war on Ukraine, and it all creates a very gloomy outlook for the global economy.

About Alphabet: As just mentioned, its business seems to be doing just fine. In fact, in the first quarter of 2022, revenue and operating income increased 23% and 22%, respectively.

But since the bulk of Alphabet's revenue comes from advertising, the possibility of a recession has also weighed on shareholder sentiment. Ad spending tends to take a hit when the economy hits the skids, so there's worry that Google's growth is in for a severe cool-off.  

Now what

At this juncture, investors need to weigh Alphabet's longer-term prospects against the current valuation. Digital ads are still a steadily growing industry gobbling up traditional marketing, and the tech giant has lots of other irons in the fire, like its Google Cloud segment, that give it exposure to other secular growth trends. 

The stock now trades for 22 times trailing-12-month free cash flow and 20 times expected current-year earnings. It also has some of the deepest pockets around with cash and short-term investments of $121 billion net of debt.

If Alphabet can sustain its growth momentum over the long term, now might be a fantastic buying opportunity -- if you don't mind some ongoing elevated volatility this year and can sit on your hands for at least a few years.