AI Stocks to Watch: Alphabet and GitLab Poised for Second-Half Rebound

Alphabet and GitLab were AI stock losers in the first half of 2025 but are poised to rebound in the second half. Alphabet's distribution advantage and AI-powered Search Mode, as well as its growing cloud computing business, make it a strong candidate for a rebound. GitLab's transformation into a software development lifecycle platform and its strong revenue growth make it another potential winner.

The first half of 2025 has been challenging for Alphabet (NASDAQ: GOOGL) and GitLab (NASDAQ: GTLB), with both stocks experiencing significant declines. However, the second half of the year presents promising opportunities for these AI-focused companies to rebound. This article explores the reasons behind their recent struggles and the factors that could drive their recovery.

Alphabet: Distribution Advantage and AI-Powered Search Mode

Alphabet, the parent company of Google, has seen its stock price drop significantly in the first half of 2025. The primary factors contributing to this decline include increased competition in the search engine market and concerns about the company's ability to maintain its dominance. However, Alphabet possesses several strengths that position it well for a rebound in the second half of the year.

One of the key advantages of Alphabet is its distribution advantage. The company's vast network of products and services, including Google Search, YouTube, and Google Cloud, provides it with a strong foundation for growth. Additionally, Alphabet's AI-powered Search Mode, which leverages machine learning to deliver more relevant search results, is a significant differentiator in the competitive search engine market [1].

Furthermore, Alphabet's growing cloud computing business presents a substantial opportunity for future growth. The company's Google Cloud platform has been gaining traction, particularly in the enterprise sector, and its strong partnerships with leading tech companies underscore its potential for expansion [1].

GitLab: Transformation into SDLC Platform and Strong Revenue Growth

GitLab, a platform for managing software development lifecycle (SDLC) and AI products, has also faced a challenging first half of 2025. However, the company's strategic positioning in the rapidly evolving tech landscape makes it an attractive investment for the second half of the year.

GitLab's transformation into a comprehensive SDLC platform has been a key driver of its growth. The company's platform integrates all key aspects of the SDLC on one platform, offering an integrated experience that boosts productivity and reduces friction. This comprehensive approach is particularly beneficial in today's complex software development environment, where the rapid ongoing adoption of generative AI and emerging Agentic AI solutions are impacting the market positively [2].

One of the key drivers of GitLab's growth potential is the increasing adoption of its Ultimate subscription plans. As of the latest data, these plans account for 25% of paid users, up from 5% in FY20. This indicates a significant upsell potential among the company's 10,000+ customers, which can substantially boost future revenue growth [2].

Moreover, GitLab's platform offers AI-driven add-on products that further enhance its value proposition. The company's ability to upsell these products to its existing customer base presents a meaningful opportunity for revenue expansion.

Conclusion

While the first half of 2025 has been challenging for Alphabet and GitLab, the second half of the year presents promising opportunities for these AI-focused companies to rebound. Alphabet's distribution advantage and AI-powered Search Mode, along with its growing cloud computing business, make it a strong candidate for a rebound. GitLab's transformation into a software development lifecycle platform and its strong revenue growth make it another potential winner. Investors should closely monitor these companies as they continue to capitalize on the growing demand for cloud and AI applications.

References

[1] https://www.nasdaq.com/articles/artificial-intelligence-ai-stock-looks-set-second-half-comeback

[2] https://www.ainvest.com/news/gitlab-sees-significant-growth-opportunities-ai-driven-software-development-2507/