Neil Patel, The Motley Fool

Sat, May 31, 2025, 3:30 PM4 min read

• Alphabet is taking full advantage of the opportunity with AI, bolstering its various products and services to better serve users and customers.

• The business possesses numerous competitive advantages, most notably powerful network effects.

• The current dip provides investors with a chance to buy shares at a discount to the market.

• 10 stocks we like better than Alphabet ›

By zooming out, it becomes obvious that Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) has been a huge winner for investors. Shares have surged 144% in the past five years, and they're up an impressive 525% just in the last decade. Becoming a dominant internet enterprise has resulted in some very happy shareholders.

But as of this writing on May 28, this top technology stock trades 16% below its high, which was reached on Feb. 4. Should you take advantage of the market's pessimism and buy the dip on Alphabet right now?

With the proliferation of generative artificial intelligence (AI) tools in recent years, investors have rightfully been concerned that Alphabet's crown jewel, Google Search, that represented 56% of sales in the first quarter, would be disrupted. That's because it's believed that users would turn more to AI when seeking out information on a variety of topics, pulling traffic away from Google Search. In turn, this could negatively impact advertising revenue.

So far, it appears these fears are overblown. First off, Google Search still commands a whopping 90% of global market share when it comes to search engines. Additionally, Google Search saw revenue increase 10% year over year in Q1. And that $50.7 billion sales figure is up 28% from the same period three years ago.

Lastly, it's worth pointing out that Alphabet isn't resting on its laurels. The company has clearly made AI a top priority. At its annual Google I/O developer conference in May, Alphabet did not disappoint. A notable 100 updates were announced, with new AI features coming across the board.

Alphabet is already finding ways to make money from AI. "For AI Overviews, overall, we continue to see monetization at approximately the same rate," Chief Business Officer Philipp Schindler said on the Q1 2025 earnings call when comparing Overviews to traditional search.

And when it comes to advertising customers, AI is helping them create more effective marketing campaigns that can increase return on spend and enhance targeting capabilities.

In Q1, Alphabet generated $34.5 billion in net income. This puts it in an enviable position to keep plowing sizable financial resources into AI initiatives to bolster its competitive standing.