To The Moon

🌟🌟🌟Watching $Alphabet(GOOGL)$  $Alphabet(GOOG)$  stock chart over the last 24 hours wasn't just painful.  It was historically brutal.  In its worst single day crash in its 22 year history as a public company, Alphabet's shares plummeted by a staggering 12.6% down to USD 283.82.  In a matter of hours, a mind numbing USD 480 billion to USD 500 billion in market value evaporated into thin air.  It is the second largest single day market cap destruction in the history of Wall Street.

As an individual investor, it is easy to feel hyper exposed in moments like this.  When a company is aggressively reshaping its entire architecture for the AI era, structural disruptions can and do happen.  A diversified portfolio is always the best defence against this kind of market turbulence.

But if I am feeling a sense of deja vu right now, it is because I have survived this exact scenario before.

My Rollercoaster Since August 2022: I Have Been Forged in Fire

For anyone like me who bought Alphabet back in August 2022 and held on tightly until today, this isn't my first rodeo.  I remember the sickening feeling later that same year when Alphabet fell all the way below USD 100 a share during the brutal 2022 tech bear market.

Back then, the headlines screamed that Google was dead, that inflation would crush ad spending and that the company has lost its mojo.  The panic felt absolute.  Yet by holding through that below USD 100 abyss, I have watched Google scale to historic, breathtaking all time highs to USD 408.61 earlier this year.  I did not break then and understanding exactly what triggered today's panic is the key to why I am refusing to break now.

Is Alphabet Really In The Soup?

The market behaves like a manic depressive entity on earnings day.  Wall Street looked at Alphabet's Q3 scorecard and threw a historic tantrum.  However on closer look, it reveals that while Alphabet is under short term pressure, it is far from broken.

The Cash Burn Shock:

Alphabet pushed its capital expenditure to a massive USD 51.4 billion for the quarter.  Because Alphabet is building data centres at a breakneck pace, it reported a negative free cash flow of USD 9.1 billion.  This marks its first negative cash flow loop in 22 years.  Wall Street hates seeing cash flow run red.

The Profit Drag:

Net Profit fell 25% year over year to USD 26.2 billion, resulting in an EPS of USD 2.12 that missed the USD 3.02 consensus by a mile.  But looking at the fine print tells me this wasn't an operational failure.  It was driven by an USD 8.7 billion accounting paper loss on equity investments, heavily impacted by its stake in $SpaceX(SPCX)$ which has faced public market valuation adjustments since its June listing.

The Core Search Deceleration:

Search ad growth cooled down to 12%.  The market is terrified that Google's new AI Overviews are cannibalising its own as revenue, creating a temporary bridge where they are spending billions to build AI but temporarily making less from traditional clicks.

Why I Am Still Holding: The True Scale of the Alphabet Empire 

When the market panics, it forgets what Alphabet really is.  It treats Google like a simple search bar, completely ignoring the monied fortress being built underneath.

There are 2 massive reasons why value legends like Greg Abel, Warren Buffett's successor at Berkshire Hathaway recently expanded their Alphabet position to USD 37 billion.  They are greedily buying the fear:

1.  Google Cloud and the TPU Monopoly Engine 

While Search decelerated, Google Cloud revenue skyrocketed by an unbelievable 103% to USD 30.7 billion.  Its operating income literally tripled to USD 11.1 billion.  Google isn't just buying chips from NVIDIA.  It is building its own custom Tensor Processing Units (TPUs).    Google is so dominant that even OpenAI is reportedly planning to buy Google's TPUs to run its own models.  Google is effectively taxing the entire AI revolution through its infrastructure.

2.  The Deep Value of Alphabet's Other Bets

When I buy Alphabet, I am not just investing in an ad company.  Alphabet owns an unparalleled incubator of future monopolies that the market currently values at exactly zero dollars.  Alphabet's Other Bets segment is scaling rapidly on the global stage:

Waymo:

Waymo is expanding rapidly. It now operates across 15 major US cities.  It recently expanded to San Diego, San Antonio and Tampa.  Waymo has locked down a USD 5 billion term loan to scale globally with upcoming international launches placed for Tokyo, Munich in 2027.  Waymo is also launching in Singapore by 2028.

SpaceX:

Alphabet partnered with Fidelity in January 2015 to inject a USD 1 billion joint investment in $SpaceX(SPCX)$ .  Following SpaceX's huge market debut on June 12 2026, Alphabet went public with an ownership of 551.2 million shares, making it the single largest institutional shareholder of SpaceX outside of Elon Musk himself.

Why SpaceX Created Short Term Financial Chaos For Alphabet 

While a 100x return is a staggering victory, holding such a massive public equity stake has made Alphabet's quarterly earnings a slave to SpaceX's stock market fluctuations.

Standard accounting rules require that Alphabet must report all unrealised paper gains or losses on its income statement every quarter.

When SpaceX shares slipped from their June high of USD 170.86 down toward the USD 143 range by the end of September, it triggered an astronomical USD 8.7 billion in cash paper loss for Alphabet.

The reality is Alphabet's underlying core operating income actually rose 30%.  The business itself didn't suffer, its net bottom line was simply bruised by the volatile price swings of Elon Musk's rocket ship.

By maintaining this huge position in SpaceX, Alphabet has essentially hedge the future of communications.  When the market stops panicking over short term accounting noise, it will realise that this "side bet" on SpaceX covers almost 10% of Alphabet's current valuation.

Alphabet's Valuation Springboard

Following the 12.6% drop to USD 284, Alphabet is trading at a trailing P/E ratio of just 14.7x.  That is a valuation typically reserved for a dying brick and mortar retail store, not a debt free monopoly expanding its cloud infrastructure by triple digits.

Wall Street's average consensus price target sits at USD 425.04, implying a huge 49.7% upside from the recent drop in price.  Morningstar pegs Alphabet's intrinsic fair value at USD 433.

Concluding Thoughts 

I did not let the market shake me out when Alphabet slipped under USD 100 in 2022.  Today, Alphabet generates nearly double the cloud revenue, dominates the autonomous driving landscape via Waymo and trades at the cheapest valuation in years.

The Alphabet soup might be hot right now, but for a patient investor like me, this looks like the exact kind of temporary fear Warren Buffett told us to look for.

Charlie Munger, Warren Buffett 's legendary partner famously reminded us that: 

"The big money is not in the buying and selling but in the Waiting".

@Tiger_SG  @TigerStars  @Tiger_comments