Alphabet (GOOG 0.29%) (GOOGL 0.50%) has been a top stock to own over the past year. If you bought shares at this time last year, you're up about 100% on your investment. However, the stock has shown some weakness lately and is currently about 12% off its all-time high set at the beginning of May.
With the stock going on sale for the first time in a while, many investors are wondering if this is their chance to get into Alphabet stock at a much lower price. Let's take a look at Alphabet's long-term prospects and see if this dip is a smart time to buy the stock.
Image source: The Motley Fool.
Alphabet's AI strategy is panning out
Early last year, Alphabet was written off as an artificial intelligence (AI) loser. AI was supposed to replace Google Search, and Alphabet's attempts at a large language model were not panning out. However, all of that seemed to be dispelled throughout 2025, which kicked off a major rally in the stock.
NASDAQ: GOOGL
Key Data Points
Now it's clear Alphabet will be an AI winner.
Its strategy is fairly simple: Cast a wide net and see how much market it can capture. As it turns out, this wide net has captured nearly everything it set out to catch.
For Google Search, Alphabet updated the platform to include an AI-powered search summary with each result, bringing AI to the masses. Its own generative AI model, Gemini, has quickly emerged as one of the most powerful options available, especially at lower price points. Lastly, Google Cloud has become one of the top options for running AI workloads.
All these endeavors have led to a dominant AI strategy, and the market has rewarded the stock with huge gains. But has it gotten too expensive?
GOOG PE Ratio (Forward) data by YCharts
At 25 times forward earnings, Alphabet's stock is on the higher end of its valuation that investors have seen over the past couple of years. But 25 times forward earnings is about where I'd expect an AI hyperscaler to trade. So, I don't think Alphabet's stock is expensive, but I don't consider it cheap either. Alphabet's future returns will come from business growth, and with Wall Street analysts guiding for 21% growth this year and 19% next year, I think it's a pretty compelling AI stock to buy now.
Alphabet won't be growing at a 100% pace anytime soon, but I think it's a strong candidate to crush the market over the next few years.
