What Happened?
Shares of online advertising giant Alphabet (NASDAQ: GOOGL) fell 2.1% in the afternoon session after the stock was caught in a broader tech-sector downturn fueled by renewed uncertainty over U.S. trade tariffs.
The sell-off followed an appeals court ruling that recently imposed U.S. "reciprocal" tariffs are illegal, sparking fresh concerns about trade policy. The news pressured many of the world's largest technology companies, with Nvidia, Amazon, Meta Platforms, and Microsoft also seeing declines in trading. Alphabet's drop also comes after a strong five-month winning streak that pushed the stock into what some analysts consider "overbought territory." The stock's daily Relative Strength Index (RSI), a momentum indicator, had approached 75, a level that can signal a potential pullback or correction is imminent.
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What Is The Market Telling Us
Alphabet’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 7 months ago when the stock dropped 8.7% on the news that the company reported underwhelming fourth-quarter results.
Its total revenue was in line and its Google Cloud revenue missed, spooking some investors who had high expectations.
Given the secular trends surrounding Google Cloud along with its long-term profit margin potential, it was increasingly a sharp focus of investors and the market. We note that Microsoft's Azure division also posted worse-than-anticipated results, signaling the market was overly optimistic about cloud computing for Q4.
On the brighter side, advertising revenue slightly exceeded expectations, driven by strong contributions from both Search and YouTube. It was also encouraging to see Alphabet beat analysts' operating income expectations this quarter. In AI, the company earmarked $75 billion for capital expenditures in 2025—well ahead of Wall Street's estimates. It also rolled out its latest AI model, Gemini 2.0, to the public, aiming to expand its reach and stay competitive with rivals.
Zooming out, we think this was a mixed quarter with areas of underperformance weighing on shares that had made 52-week highs right before this earnings announcement.
Alphabet is up 10.2% since the beginning of the year, and at $208.73 per share, it is trading close to its 52-week high of $212.91 from August 2025. Investors who bought $1,000 worth of Alphabet’s shares 5 years ago would now be looking at an investment worth $2,431.
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