Is Alphabet Stock A Better Play Than Amazon?

April 15th, 2025 by Trefis Team

Question: Why would you pay 34x earnings for Amazon stock – when you can buy Google stock for 19x? You wouldn’t, especially when you consider 3 simple facts:

  • Growth: While both companies exhibit comparable top-line growth, Google demonstrates a slightly higher rate of 14% compared to Amazon’s 11%. This indicates a potentially stronger growth trajectory for Google.
  • 2. Profitability: Google boasts significantly higher profit margins, exceeding 30%. This means a larger portion of Google’s revenue translates into profit for shareholders. In contrast, Amazon’s profit margins are considerably lower, at 11% or less. Therefore, despite similar revenue growth, Google’s superior margins suggest a more efficient and profitable business.
  • Tariff Exposure: Google’s revenue is likely to be less vulnerable to the impact of tariffs compared to Amazon. The latter’s extensive global e-commerce operations expose it more directly to international trade policies and the complexities of international supply chains, including potential supply chain risks. While rising datacenter costs could affect Google, its primary advertising business is less susceptible to tariffs, especially in China where government restrictions favor Baidu.

Image by AS Photograpy from Pixabay

Is Google A Safe Bet?

While Google (GOOG) might not be a traditional “safe haven” investment, it’s important to consider its historical performance during market shocks. For example, Google’s stock experienced significant declines of 45% during the 2022 inflation shock and 31% during the Covid-19 pandemic. This illustrates that it’s not immune to market volatility.

However, it’s also worth noting that Google’s stock has already experienced a substantial correction, falling from a high of over $205 to below $160. This recent decline suggests that some of the potential downside risk may already be priced in.

AI Innovation

Given the widespread expectation that Artificial Intelligence is a transformative technology with significant long-term growth potential, regardless of tariff implications, Google could be a compelling long-term investment at its current valuation. While both Google and Amazon offer AI infrastructure, Google’s strength lies particularly in its groundbreaking AI research and its ability to seamlessly integrate these advancements into its widely used consumer products. This combination of cutting-edge research and a massive user base across platforms like Search and YouTube provides Google with a significant advantage and a powerful platform for continued AI innovation.

What Could Go Wrong?

Of course, investing in Google is not without its risks. There’s the possibility of earnings falling short of expectations or growth slowing down in the near term. Additionally, unforeseen and currently unimaginable events could negatively impact the stock. You should be prepared for potential volatility and should not invest if you cannot tolerate a significant downside risk, such as a potential 30% drop from the current levels. It’s important to maintain a rational mindset in the market to avoid impulsive decisions. Despite these potential risks, if you are a long-term investor with a 3-5 year horizon who is looking for a “buy and hold” investment, we believe that Google at its current valuation could represent an interesting entry point.

Systematic Strategies & Rules-Based Wealth Management

Trefis runs systematic portfolio strategies that incorporate risk control through a combination of high-quality picks and active hedges. We’ve partnered with Empirical Asset Management, a rules-based wealth manager, to make these strategies available to investors. If you’re interested in learning more about Trefis strategies or Empirical check out this link.