Alphabet (NASDAQ:GOOGL) stock is actually up 1% over the past month, with Donald Trump’s trade policy causing plenty of volatility in the interim. However, with the pound strengthening around 2% versus the dollar over the period, £10,000 invested then would be worth around £9,900 today. Exchange rates can make a big difference.
What’s been going on?
Donald Trump’s sweeping tariffs have created uncertainty for Alphabet, Google’s parent company. And there are both direct and indirect impacts. The most immediate risk is to Alphabet’s core advertising business, which relies heavily on retail clients — retail accounts for at least 21% of Google’s ad revenue.
As tariffs threaten to slow the economy and squeeze business budgets, advertisers, especially in the Asia-Pacific region, are showing caution and could reduce spending, posing a risk to Alphabet’s ad growth. Notably, the expiration of the de minimis trade exemption in May will hit Chinese e-commerce advertisers like Temu and Shein, major Google ad buyers, further pressuring ad revenue.
Alphabet also faces increased costs for its cloud and AI infrastructure, as the company is investing $75bn this year in servers and data centres. Much of this investment relies on imported hardware that could be subject to tariffs. What’s more, the company’s cloud customers may already be tightening their belts.
Despite these challenges, Alphabet reported strong first-quarter results — admittedly these results relate to the period before 2 April. Advertising revenue rose 8.5%, total revenue jumped 12%, and net profit surged 46% year on year.
The company also announced a $70bn share buyback and highlighted robust growth in AI products, including the rollout of Gemini 2.5, and continued momentum in its cloud business. This builds on Alphabet’s largest-ever acquisition in March. The tech giant agreed to purchase cybersecurity firm Wiz for $32bn.
Mag 7 value pick
Alphabet is currently the cheapest stock among the Magnificent Seven based on valuation metrics. Its forward price-to-earnings (P/E) ratio is 17 times, which is 32.7% below its own five-year average (25.3 times). This means Alphabet is trading at a significant discount to its historical valuation. While it’s more expensive than other communications companies, it’s cheaper than peers in the information technology sector.
Compared to the Magnificent Seven, which had an average forward P/E of around 25, Alphabet stands out as a relative bargain. What’s more, it’s P/E-to-growth (PEG) ratio is also attractive. The forward non-GAAP PEG is 1.07, lower than the communications sector median of 1.21 and information technology sector median of 1.5 times. With regards to the PEG ratio, only Nvidia currently appears to be cheaper. That’s a very good sign.
While I appreciate there will be challenges given a potential economic downturn and tightening of advertising budgets, Alphabet is actually the only US stock I’ve bought in April. I may buy more soon, but I’m keeping a close eye on exchange rates as well. These can wipe out share price gains.
