Alphabet’s $32 Billion Bet: Smart Move or Costly Mistake?

Alphabet tripled its price per share over the past 5 years thanks to Google Search, which has the largest share of the search engine market, Android the largest mobile operating system in the world and YouTube the dominant video-sharing platform.

But now it sits at a crossroads, and the question for investors is has the time come to sell the Search giant?

Key Points

• Alphabet remains dominant in search ads, but Meta’s targeted, cost-effective approach is gaining ground. 

• Antitrust scrutiny could force Alphabet to sell Chrome or Android, while its $32B Wiz acquisition signals a push into cloud and cybersecurity to compete with AWS and Azure.

• Analysts rate Alphabet a Buy, expecting upside from AI-driven ads and cloud expansion.

Alphabet Faces Tough Competition and Some Challenges

A majority (76%) of Alphabet’s revenue, $264.59 billion, came from online advertising in 2024, $26.7 billion more compared to 2023. However, as a portion of overall revenue, advertising was down around 2%, and it didn’t grow as much as expected. The missed mark happened despite a record Q4 2024 for YouTube advertising from the American election cycle.

Meta (formerly Facebook) added $32.55 billion in advertising revenue from 2023 to 2024. Online platforms Facebook, Instagram, and WhatsApp snared $164.5 billion in 2024..

Although Meta remains $100 billion short of Alphabet, the social media juggernaut grew by $6 billion more ad revenue than its main advertising rival. Perhaps Meta’s cost-effective approach, with lower costs per click than Google, is working.

Still, Google dominates online searches despite OpenAI’s ChatGPT making headlines over the past two years. The more online searches people perform on Chrome, Android, and YouTube, the broader Alphabet’s advertising reach. Google offers wider opportunities for ad placements.

But Facebook offers deeper data analytics when it comes to targeting specific audiences to go along with its cheaper ad rates. More people willingly feed more information to Facebook than they give to Google due to its penchant for friends sharing updates with each other. Facebook may very well have an advantage with its first-party data gathering techniques and policies.

Regulatory Climate

Alphabet lost an antitrust lawsuit in August 2024. The Department of Justice filed court briefs stating that the tech titan should be forced to sell Google Chrome and possibly Android. The change of administration did not alter the DoJ’s stance.

The final decision will come in late summer of 2025 during the remedies portion of the case, with Alphabet stating it will appeal the decision. The case could continue well into 2027 after all appeals are exhausted.

That seems like plenty of time for management to put a plan in place but a recent acquisition has left investors wondering what Alphabet is thinking.

Acquisition of Wiz

Alphabet paid $32 billion to acquire Wiz, a startup cybersecurity firm founded in January 2020. It’s the largest acquisition in the company’s history.

The company specializes in cloud security, and was valued at $12 billion as of last July. Google offered to buy Wiz last year for $23 billion in 2024, which the company rejected. The five-year-old company took a risk, stood by its product offerings, and won with a much higher sale price.

Some investors expressed concerns about the price of the acquisition. Alphabet stock tumbled 2.34% on the day the acquisition was announced. However, the purchase gives a clue as to which direction Alphabet is headed.

Alphabet Takes on Amazon and Microsoft

Online retailer Amazon generated $638 billion in sales in 2024, with $107.6 billion of that coming from its cloud segment, Amazon Web Services. Amazon’s operating income, a better measure of profit compared to sales, was $68.6 billion last year. A majority of that operating income, $39.8 billion, came from AWS.

AWS focuses solely on cloud storage. Its relatively low overhead versus the costs make it more profitable than Amazon’s e-commerce division.

Alphabet is aiming to update, expand, and bolster its Google Cloud services, and it’s using $32 billion in cash to do it. Revenue in that division rose from $26.3 billion to $43.2 billion from 2022 to 2024. So, that segment is growing quickly.

The reason for the increase? The rise of AI.

Artificial intelligence needs large amounts of memory to store the information it searches. Amazon and its AWS rival, Microsoft Azure, are considered the top players in the market. Alphabet seems to want a larger share of the cloud computing and AI markets, and it may perceive Wiz as the gateway to that goal.

Just as Meta won’t overtake Alphabet in advertising revenue yet, the same is true for Google Cloud versus AWS and Azure.

Alphabet’s long-term stock performance still remains solid, despite a challenge from ChatGPT.

The Rise of an AI Contender

Chances are good you will see a Google AI overview arrive at the top of the screen, especially on a mobile device. At some point, users will view advertisements embedded in AIOs. Alphabet rolled out these new kinds of ads on mobile in October. 

The shift to AIO ads seems to indicate that Alphabet still wants to dominate the AI and search markets as two of the company’s core functions. Perplexity followed Alphabet’s example and began its own advertising push in November. There are no ads on ChatGPT as OpenAI stated in December that it has no active plans to pursue advertising (but that may change).

Some experts have noted that ChatGPT and Perplexity are a threat to Google’s search dominance. The data simply doesn’t back up those claims at this point. Google had 139.9 billion visits in January 2025, compared to 4.7 billion visits to ChatGPT and 131,800 visits to Perplexity.

Google’s been crawling the internet for more than 25 years. While ChatGPT is useful for longer and complicated queries, Google is often deemed more relevant with traditional searches for finding the perfect pair of tennis shoes, the camping spot with the best view 50 miles from home, or the top restaurant in town.

Is Alphabet Stock a Sell?

Alphabet stock is not a Sell, and by contrast is a Buy with upside to $219 per share according to the 48 analysts covering the search giant.

Alphabet’s core business model isn’t going away and better yet for investors, AIO advertising may generate even more revenue.

Then there’s the Wiz acquisition, which may help Alphabet increase its presence and customer base in cloud computing.

Sure, Alphabet has made some questionable acquisitions in the past. Motorola Mobility is probably the most notorious. And regulatory hurdles cannot be overlooked but investor sentiment regarding the Wiz acquisition is likely a temporary setback.