Nasdaq Bear Market: Buy the Dip on This "Magnificent Seven" Stock That's Down 29%

The Nasdaq-100 and Nasdaq Composite indexes have officially entered bear market territory, down by more than 20% from their all-time highs. Many of their component stocks are down even more than that, including technology giant Alphabet(GOOG 10.08%), which is trading 29% below its peak as of this writing. The company that owns Google, YouTube, and Android has been on a roller-coaster ride ever since OpenAI's ChatGPT went viral over two years ago, and at the moment, the track is sloping downward. However, that has created a fantastic buying opportunity for investors ready to deploy some cash: Alphabet is the one "Magnificent Seven" stock I would buy the dip on right now.



The current bear market in the Nasdaq is driven by several key factors, including the announcement of steep tariffs by President Donald Trump, which has led to a global stock sell-off. These tariffs, ranging from 10% to 99%, have significantly impacted tech companies that rely on imports from countries like China, Taiwan, and Vietnam. The tech-heavy Nasdaq Composite has experienced harsher drops compared to other major indexes like the S&P 500 and Dow Jones due to its reliance on these imports.

One of the "Magnificent Seven" stocks that has been particularly impacted is Alphabet (GOOG), which has declined by 29% from its peak. Alphabet, the company that owns Google, YouTube, and Android, has been on a roller-coaster ride since OpenAI's ChatGPT went viral over two years ago. The company's stock has been affected by the tariff-induced recession, which has led to a hit in growth for Google Search and the company's broader advertising sales. Alphabet is now the largest seller of digital advertising space in the world, and it will likely see a hit to growth in 2025 if a tariff-induced recession materializes. This has caused the stock to trade at a forward price-to-earnings ratio (P/E) below 17, which is well below the S&P 500's current average of 25. Despite this, Alphabet maintains a financially conservative balance sheet and a large cash stockpile, making bankruptcy a non-issue. The company's Google Cloud division, which has seen rapid growth due to the increasing amounts of computing capacity needed to train and run artificial intelligence (AI) models, is expected to continue delivering durable earnings growth over the next decade.

The current valuation of the "Magnificent Seven" stock, specifically Alphabet (GOOG), is notably lower than its historical averages. As of April 10, 2025, Alphabet's stock is trading at a forward price-to-earnings ratio (P/E) below 17, which is well below the S&P 500's current average of 25. This significant discount suggests that the stock is undervalued relative to its historical performance and the broader market. The company's financially conservative balance sheet and large cash stockpile further support the idea that it is a stable investment, with no immediate risk of bankruptcy. Additionally, Alphabet's recent entry into the dividend-paying arena, with a current yield of 0.5%, and its aggressive share repurchase program, which spent over $62 billion in 2024, indicate a strong commitment to returning capital to shareholders. This combination of a low P/E ratio, robust financial health, and shareholder-friendly policies implies that Alphabet has significant potential for future growth, especially as it continues to scale its Google Cloud division and capitalize on the rising use of AI services.

In the near term, there are reasons to feel concerned about the outlooks for Google Search and the company's broader advertising sales. Alphabet is now the largest seller of digital advertising space in the world, and it will likely see a hit to growth in 2025 if a tariff-induced recession materializes. There is no way for the company to avoid the impact that would have on corporate marketing budgets. However, at the moment, it looks as though that bad macroeconomic outcome is already priced into Alphabet stock. The stock trades at a forward price-to-earnings ratio (P/E) below 17, which is well below the S&P 500's current average of 25. The company also maintains a financially conservative balance sheet and a large cash stockpile. Bankruptcy is not a concern whatsoever. Plus, over the long term, the rising use of AI services should make its Google and YouTube properties even more valuable. If people are performing more and more queries due to the AI improvements to these platforms, that gives Alphabet more opportunities to display advertisements in conjunction with their results. It may not look like it now, but Alphabet is poised to keep delivering durable earnings growth over the next decade.

The cherry on top of the Alphabet buy thesis is that the company recently became a top returner of capital to shareholders, especially compared to its big technology peers. It just started to pay a dividend, and at the current share price, it yields 0.5%. There's plenty of room for management to boost the payouts over the next few years. Share repurchases are a larger part of the equation. Last year, Alphabet spent more than $62 billion buying back its own stock, bringing down the number of shares outstanding -- which is a good thing for the remaining shareholders. With the stock down by about 29% from its 2025 peak, Alphabet now can buy back its stock at much lower prices and a much more attractive earnings multiple. Instead of bringing down its share count at the 1% to 2% annual rates it has historically, it could start reducing its shares outstanding by 3% to 5% a year. This will boost the returns of investors who hold for the long haul. Between the growth of Google Cloud growth, the potential of AI, and the company's robust capital-return program, Alphabet looks poised to deliver rapid earnings growth over the next decade, which will drive the stock price higher. Focus on that instead of the stock's crash so far this year.