Alphabet’s stock, although considered by many as a fundamental source of strength in the stock markets worldwide, has experienced significant decreases throughout its existence. Google’s parent company, Alphabet, has suffered painful corrections in the market on several occasions, where the most dramatic of which was the more than 30% decline in less than two months in 2022. It resulted in the loss of hundreds of billions of dollars in market capitalization.
However, these incidents remind us that the very factors that often characterize the company such as size, profitability, and being a market leader, do not often guarantee that a company will be protected when structural risks start to show up.
As Alphabet gets deeper into the next five years, the investors are more concerned about the negative impact of a combination of factors like regulatory pressures, the AI disruption, and an upsurge in capital spending that can defy the company’s long-term earning potential and its valuation.
Regulatory Risks
The most important downside for Alphabet may be the forced deprivation of the company’s core ad tech operations. Although the backbone of Google’s revenue-generating machine is still its advertising network, this very dominance is now under risk from the regulators.
In a ruling by a federal judge in April 2025, it was declared that Google has an illegal monopoly in the ad tech market, which gives rise to solutions that can radically change the company.
Since then, the U.S Department of Justice has been advocating aggressive steps, which includes making the sharing of advertising data with competitors mandatory, along with potential sale of some important ad units.
In case Alphabet is hit by the regulations, it might have to offload assets at lower than the market prices and bear the prolonged regulatory uncertainties that would in effect lower its valuation. A ruling on remedies is expected as early as the first half of 2026, which makes it a near-term issue rather than a long-term concern.
AI Search
The economic power of search is being undermined by AI. Those search experiences that are AI-assisted are starting to shake up the most profitable business line of Google. AI Overviews were rolled out, and one consequence of this was that the number of clicks on the topmost search links was reduced. That has an impact on the revenue coming from ads placed on the web, where the revenue from the high-margin area of the business is in danger.
Also, the traditional search volume is under pressure. Gartner has predicted a 25% reduction in the traditional search volume by the end of 2026, and such a transformation can have a serious effect on Google’s advertising revenue, since it is mainly based on high margins.
On the other hand, the fall of the U.S market share of Google below 85% has also been predicted, and this indicates that the alternatives powered by AI could take away a part of Google’s supremacy faster than the market is anticipating.
Costly AI Race
As much as AI has opened new doors, it still leaves Alphabet with no choice but to participate in an expensive infrastructure arms race. Huge investments in data centers, custom chips, and cloud capacity is required in order to compete with the tech giants like Microsoft, Amazon, and OpenAI-supported ecosystems.
These technological advancements are not only absorbing the entire free cash flow, but are also raising questions regarding the sustainability of the company’s margins.
The capital expenditures of Alphabet in 2025 have been modified upward for the third time already, from the $75 billion originally planned to the $91–$93 billion range. Also, management has indicated that the spending will continue rising into 2026.
Though these investments are strategically important, there is a risk that they will exceed the growth of revenues in the short term, which might result in the company’s profitability ratios being overshadowed and the market capitalization being reduced if the expected returns do not come in soon.
Worst Case Scenario
The history of Alphabet gives a harsh but realistic idea of the economic conditions that can prevail during macroeconomic or company-specific crisis scenarios. Google’s stock experienced a decline of about 65% during the Global Financial Crisis.
The inflation-induced selloff accounted for a 44% drop, while the Covid-19 pandemic and the market correction in 2018 caused declines of approximately 30% and 23%. These incidents are a clear indication that even the strongest and most stable companies in terms of finances and business models will still suffer major losses when the sentiment turns against them.
Warning Signs
Alphabet has shown good results in the financial aspect of its business. The company’s revenue growth rate is at 13.4%, based on the last twelve months, and it has an average of 11% over the past three years. Cash inflow is still strong, as the company reported almost 19.1% free cash flow margin and a 32.2% operating margin. These numbers indicate that the main part of the business is still doing well, while risks are piling up.
On the other hand, the valuation factor suggests that things may not go smoothly. Alphabet’s price-to-earnings ratio is around 30.8 at the moment, which is a level that supposes continuous growth and stability of margins. However, a combination of regulatory disruption, AI-driven monetization pressure, or prolonged margin compression could challenge that assumption.
Bottom Line
Alphabet continues to be a cash-generating powerhouse and has strong competitive advantages, but it is not completely protected from significant downside risk. The investment narrative is changing, where regulatory threats, AI-driven search behavior shifts, and increased capital expenditures are key factors.
The utmost issue for investors is not if Google is an excellent company anymore, but if the future returns on investment are good enough to justify the complexity and risk that are increasingly ingrained in its stock.
