Over the past two years, artificial intelligence (AI) stocks surged as investors rushed in, afraid of missing out on the next big tech boom. Valuations climbed quickly, and excitement around AI pushed many big names sharply higher. Recently, tech and AI stocks have taken a hit amid concerns about high valuation and questions over whether aggressive AI investments are delivering results fast enough. However, seasoned investors know that the real opportunity often appears when the excitement cools down.
So what is smart money doing now?
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Several factors have influenced the recent tech and AI selloffs. Most tech companies have invested heavily in AI, putting pressure on their margins and balance sheets but not generating sufficient revenue or earnings growth at the moment. These AI stocks are being scrutinized for their lofty valuations. Other factors that affected it were large funds locking in profits after strong rallies, a market cycle shift from high-growth AI stocks to more defensive and value plays, and geopolitical uncertainty.
Despite the panic selling, long-term savvy investors know that these corrections do not necessarily weaken the long-term AI story, at least not for legacy players like Alphabet (GOOG) (GOOGL). They focus on fundamentals, cash flow strength, competitive advantage, and long-term earnings power and not daily price swings.
GOOGL stock has returned 745% over the last 10 years and has gone through numerous correction cycles. What kept its stock rising is the company’s consistent revenue and earnings growth, cash flow strength, infrastructure leadership, and long-term growth visibility. Alphabet’s revenue has increased from $74.9 billion in fiscal 2015 to $402 billion in fiscal 2025. Similarly, earnings have risen from $1.14 per share to $10.81 per share over the same period.
While the tech selloff has kept GOOGL stock just about flat so far this year, the company actually reported what CEO Sundar Pichai called a “tremendous quarter,” proving that the underlying AI engine…
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