Google Stock's Monday Rollercoaster: Understanding the Rise and Fall

Alphabet shares experienced a dramatic intraday reversal on Monday, initially surging nearly 2% in early trading before surrendering all gains and slipping into negative territory. By mid-morning trading, the Google parent company stock had dipped 0.3%, leaving investors puzzled about what triggered the sudden shift in sentiment.

Canadian Tax Reversal Initially Fueled Optimism for Alphabet

The early rally was straightforward to explain. On Sunday, Canada announced it would withdraw a proposed Digital Services Tax (DST) that had threatened substantial costs for tech giants like Google. The DST was intended to impose levies on companies offering social media, advertising, and data services—making Google a primary target. President Trump had publicly identified the DST as a barrier to negotiating a new trade deal with Canada, so the government’s decision to rescind the tax policy was meant as a gesture to facilitate trade discussions. For Alphabet investors, this represented good news, explaining the stock’s morning pop.

Capital Spending Concerns and Valuation Pressures Dampened Enthusiasm

What’s less clear is why investors rapidly reversed course and began selling Google shares. The answer likely lies in deeper concerns about the company’s valuation and spending trajectory. While Alphabet generated more than $110 billion in GAAP profits over the trailing 12 months, the company continues pouring massive resources into artificial intelligence development and infrastructure. Those AI bets may pay off handsomely—or they may not. What’s certain is that these capital expenditures have become enormous, reducing the company’s actual free cash flow to just under $75 billion.

The gap between reported profits and real cash generation reveals a critical issue: for every dollar of GAAP profit Alphabet reports, the company is actually producing only $0.67 in free cash flow that shareholders can access. At a price-to-free cash flow multiple near 29x, Google shares appear stretched from a valuation perspective. This metric suggests the stock is pricing in significant future growth that may take years to materialize—if it materializes at all.

Is Google Stock Worth Buying at Current Prices?

For investors considering whether Alphabet deserves a spot in their portfolio, the valuation picture raises red flags rather than green lights. The company’s heavy AI spending, while strategically important, is consuming capital at a pace that makes the stock look more like a “sell” candidate than a “buy” on a pure valuation basis. Until Alphabet demonstrates that these investments are generating proportional returns, cautious investors might prefer to wait for more attractive entry points.