Alphabet's Resilience in the Crosshairs: Why Jim Lebenthal is Holding Despite the Headwinds

The stock market’s volatility often turns headlines into buying opportunities—or reasons to flee. Alphabet Inc. (GOOG), the parent company of Google, has faced its fair share of scrutiny lately. A 7.5% drop in its share price in early May 2025, triggered by Apple’s revelation that browser searches on its devices had declined for the first time ever, has sparked debate. Yet, against this backdrop, Jim Lebenthal, a partner at Cerity Partners, has publicly leaned toward holding Alphabet stock. His rationale? A blend of valuation discipline, historical context, and faith in Alphabet’s long-term AI and cloud growth trajectory. Let’s unpack why this investor sees value in sticking with Alphabet—and what it means for investors.

The Immediate Catalyst: Apple’s Search Shift

Apple’s admission that searches on its devices (via browsers like Safari) had fallen sent shockwaves through tech circles. After all, Alphabet’s core revenue stream—online advertising—depends heavily on search queries. A decline in search volume, even if minor, could hint at erosion of Alphabet’s dominance. The stock’s 7.5% drop on May 6, 2025, to $165.20, underscored investor anxiety. But Lebenthal argues this reaction may have overshot fundamentals.

A chart showing Alphabet’s stock dipping in early 2025 but recovering from a similar low in late 2023.

A Familiar Playbook: The Gemini Incident Revisited

Lebenthal points to a striking parallel: In 2023, Alphabet’s stock plummeted after its Gemini AI tool misfired, raising fears about its AI ambitions. Yet, within months, Alphabet’s cloud revenue surged, and its core ad business proved resilient. The company’s market cap, now at $1.997 trillion, remains a testament to its enduring strength. “Valuations were already low before this recent dip,” Lebenthal noted, emphasizing that the current price reflects pessimism that may not align with Alphabet’s long-term potential.

The Underlying Case for Alphabet

1. AI and Cloud Growth: Alphabet’s cloud division, Anthos, and its AI initiatives like Gemini 3, have attracted enterprise clients. The Mairs & Power Balanced Fund, which holds Alphabet as a top stock, highlighted this progress, even while preferring shorter-term bets on other AI stocks.
2. Adaptive Business Model: Alphabet’s ad revenue still accounts for ~60% of its top line, but its diversification into cloud services, hardware (e.g., Pixel phones), and smart home devices (Nest) creates a buffer against single-product risks.
3. Valuation Discipline: At $165/share, Alphabet trades at a forward P/E of ~20, below its five-year average of ~25. This discounts both macroeconomic uncertainties and competitive threats, suggesting a margin of safety.

Lebenthal’s Cautious Optimism

Lebenthal’s stance isn’t a blind endorsement. He stressed the need for further analysis, particularly on how Alphabet plans to counter Apple’s search decline. Yet, his historical perspective argues for patience. In 2023, Alphabet’s stock recovered 25% within six months of the Gemini incident, as investors recognized its entrenched market position and innovation pipeline.

The Bottom Line: A Hold for the Long Game

Jim Lebenthal’s inclination to hold Alphabet isn’t about ignoring risks—it’s about weighing them against a company that’s consistently navigated challenges. With a market cap nearing $2 trillion, a diversified revenue stream, and AI/cloud growth that few rivals match, Alphabet’s fundamentals remain robust. While short-term volatility may persist, Lebenthal’s caution aligns with a disciplined investor’s mantra: Buy fear, sell greed.

For now, Alphabet’s valuation and historical resilience make it a stock worth holding—if not buying—despite the noise. As Lebenthal’s past calls suggest, this could prove a prudent strategy.

Data as of May 2025. Always conduct your own research before making investment decisions.