Google Cloud doubling is impressive, so I would not interpret Alphabet’s fall as evidence that its AI strategy has failed. The concern is the gap between AI growth and cash returns. With capex surging and quarterly FCF turning negative, Alphabet still needs to demonstrate that this investment produces sufficient incremental cash flow.
Microsoft currently gives a clearer picture: strong Azure growth while still generating substantial FCF despite heavy capex. That makes the AI investment cycle easier to justify.
I would keep GOOGL on the watchlist rather than automatically buy a 10% dip. If Cloud maintains strong growth while capex growth moderates and FCF recovers, the risk-reward becomes much more attractive. Great AI demand is not enough. Eventually, AI has to pay the bills.
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