Alphabet slides 13% in a month as 3 megacap tech stocks become buys

Alphabet fell 13% over the past month to $337.39, as the megacap tech selloff deepened on investor concerns over AI infrastructure spending.

"Most AI data center owners remain committed to this year's big infrastructure spending plans," the Fool.com analyst report published June 28 said. "Meta is well equipped to do something constructive with all the AI capacity it's spending a fortune to build."

The pullback has pushed Alphabet's valuation below its historical average. The stock now trades at 25.7 times trailing earnings, below the five-year average of 28 times. The broader selloff in AI-related names has hit megacap tech broadly, with the Nasdaq Composite declining 0.24% to 25,297 on Friday and the S&P 500 slipping 0.05% to 7,354.

The dip-buying thesis rests on continued AI infrastructure spending by the largest cloud operators. Meta, Amazon and Microsoft are the three megacap stocks the report recommends as buy-the-dip candidates, citing Meta's commitment to AI capacity buildouts. For investors, the question is whether the current pullback reflects a temporary rotation or a structural reassessment of AI monetization timelines.

Meta's AI Spending Sets It Apart

The selloff in Alphabet accelerated after the company reported first-quarter earnings that showed slowing growth in its Google Cloud segment. Alphabet generated $402.8 billion in revenue in fiscal 2025, with net income of $132.2 billion. The cloud business has been a key battleground for AI workloads, and any deceleration raises questions about enterprise adoption rates.

Meta's commitment to AI infrastructure spending stands out among the megacap cohort. The social media giant has signaled it will maintain elevated capital expenditure levels, with the bulk directed toward data centers and AI compute capacity. Unlike some peers that have faced investor pushback on rising CapEx, Meta has demonstrated that its AI investments can drive advertising revenue growth.

Valuation Gap Widens Among Megacaps

The 13% decline in Alphabet shares has pushed the stock into value territory relative to its megacap peers. At 25.7 times earnings, Alphabet trades at a discount to the broader tech sector. The S&P 500 information technology sector has fallen over the past month, while the communication services sector has also declined. The Cboe Volatility Index rose to 18.5 on Friday, above its 14.3 trailing one-year average, suggesting elevated uncertainty.

The U.S. 10-year Treasury yield edged up 3 basis points to 4.28% on Friday, while the dollar index held near 105.2. The cross-asset picture suggests the equity selloff has not triggered a broader risk-off move, supporting the case that the pullback is sector-specific rather than macro-driven.

For investors weighing entry points, the key date to watch is Alphabet's second-quarter earnings report, expected in late July. The results will show whether Google Cloud growth has stabilized and whether the company's AI investments are translating into revenue. Until then, the dip-buying debate will hinge on whether the market's AI spending concerns are overblown.

This article is for informational purposes only and does not constitute investment advice.