Last week, the Nasdaq and Dow entered corrections, further dragging down some of the largest stocks in their respective indices. For the tech-heavy Nasdaq, one of those was Alphabet (NASDAQ: GOOGL), whose shares fell close to 9%, wiping out hundreds of billions in market capitalization in a matter of days.
The sharp decline in Alphabet's stock price raises a big question: Is the tech giant beginning to fall behind in the artificial intelligence (AI) race?
It's a significant shift in tone for a stock that has spent much of the past year outperforming its mega-cap peers, driven by an impressive lead in AI and stellar growth across its major business divisions. But a flurry of headlines and a brutal week for the market have some investors second-guessing whether that dominance can last.
What Happened Last Week?
It's worth noting that the broader market is already under significant pressure. Rising fears over the war in Iran and the threat of hyperinflation have pushed two of the three major indices into corrections, with the S&P 500 not far behind. That weakness has spilled into shares of GOOGL alongside most other parts of the market.
But Alphabet also has had to contend with its own headline risks. First, a Los Angeles jury found its subsidiary, YouTube, liable in a social media addiction case. The financial penalty of just a few million dollars was minor for a company of its scale. The market's concern, however, is that the ruling could open the door to future litigation that carries a much heavier price tag.
The bigger headline risk came on Tuesday, when Google announced a new AI memory compression algorithm called TurboQuant. The company's research suggests it will make AI models significantly more efficient, reducing the strain on memory chips. That sent shockwaves through the memory sector, with stocks like SanDisk (NASDAQ: SNDK) and Micron Technology (NASDAQ: MU) selling off sharply on fears that the breakthrough could slow demand for their market-leading products.
But long term, the kind of efficiency innovation being offered by TurboQuant could actually be a bullish development for Alphabet itself, similar to the reception around its TPU chip breakthrough last year.
Finally, news that CEO Sundar Pichai sold 32,500 GOOGL shares on March 18 made its rounds and sparked some concern online. But context matters: Pichai has sold the same quantity of shares—32,500—on a near-monthly basis for many preceding months. It is a routine, pre-planned transaction, and nothing out of the ordinary based on his historical insider activity.
Putting Last Week Into Perspective
When isolated, last week's performance may look alarming. But zooming out frames the five-day performance as noise amid ongoing strength. Year to date, GOOGL may be down 12%, but over the past 12 months, the stock has gained over 70% and remains the top-performing Magnificent Seven member during that period.
Over the past 30 days, Alphabet is down 12%, which places it right in the middle of the pack among its peers. Meta Platforms (NASDAQ: META) is down 20%, while Amazon (NASDAQ: AMZN) has held up best, down just over 4%.
The technical picture is where Alphabet genuinely stands apart. Of the Magnificent Seven stocks, Alphabet is the only one that remains firmly above its 200-day SMA. While Apple (NASDAQ: AAPL) is barely holding on above its 200-day SMA, the other five members of the group have already broken below that long-term technical indicator. Alphabet's relative technical strength is a meaningful distinction that investors should not overlook.
What to Watch Going Forward
The 200-day SMA, currently sitting just above $260, is the line in the sand for Alphabet. The stock needs to find support near this level to maintain its broader uptrend and higher timeframe outperformance. A close below that level would be a meaningful technical signal and likely invite further selling pressure.
More broadly, any positive development surrounding the Middle East situation, or a potential reopening of the Strait of Hormuz, could spark a sharp market-wide recovery and help Alphabet put in a meaningful bottom.
But without a major catalyst, the bears are likely to remain in control in the near term. For now, holding above the 200-day SMA is the priority, and it remains the key level to watch closely in the days and weeks ahead.
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The article "After Falling Nearly 9% Last Week, Has Alphabet Lost Its Edge?" first appeared on MarketBeat.
