Alphabet (GOOG) Slid on Market Rotation

Soumya Eswaran

Tue, May 20, 2025, 9:32 AM 3 min read

ClearBridge Investments, an investment management company, released its “ClearBridge Large Cap Value Strategy” first quarter 2025 investor letter. A copy of the letter can be downloaded here. The S&P 500 Index declined by -4.3% in Q1 2025 due to a tariff war and a shift away from AI-related tech stocks. Amid the tech-led sell-off, the benchmark, the Russell 1000 Value Index, outperformed its growth counterpart in the quarter. Against this backdrop, the strategy underperformed the benchmark in Q1. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, ClearBridge Large Cap Value Strategy highlighted stocks such as Alphabet Inc. (NASDAQ:GOOG). Alphabet Inc. (NASDAQ:GOOG), the parent company of Google, offers various platforms and services operating through Google Services, Google Cloud, and Other Bets segments. The one-month return of Alphabet Inc. (NASDAQ:GOOG) was 9.08%, and its shares lost 6.50% of their value over the last 52 weeks. On May 19, 2025, Alphabet Inc. (NASDAQ:GOOG) stock closed at $167.87 per share with a market capitalization of $2.03 trillion.

ClearBridge Large Cap Value Strategy stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q1 2025 investor letter:

"Weakness in communication services was driven primarily by Alphabet Inc. (NASDAQ:GOOG), which traded lower as the market rotated out of AI leaders. Part of the decline followed the unveiling of Chinese AI startup DeepSeek, whose new foundational and reasoning models — reportedly offering similar performance to leading U.S. models at lower compute costs — triggered a broader selloff in the AI ecosystem. Additionally, concerns are rising that Alphabet’s dominance in search could be challenged by startups like OpenAI or large platforms like Meta Platforms, which may leverage their AI capabilities to enter the search market. While Alphabet remains a highly cash-generative business trading at a reasonable multiple, we reduced our position during the quarter due to the increasing competition in its core business."

A laptop and phone open to Google's services in an everyday setting.

Alphabet Inc. (NASDAQ:GOOG) is in 7th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 174 hedge fund portfolios held Alphabet Inc. (NASDAQ:GOOG) at the end of the fourth quarter which was 160 in the previous quarter. In the first quarter of 2025, Alphabet Inc. (NASDAQ: GOOG) achieved a revenue of $90.2 billion, representing an increase of 12% or 14% in constant currency. While we acknowledge the potential of Alphabet Inc. (NASDAQ:GOOG) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.