We're scooping up more shares of this recently banged-up megacap AI leader

CNBC Finance

3 min read

We're buying 50 shares of Alphabet at roughly $301 each. Following Tuesday's trade, Jim Cramer's Charitable Trust will 200 shares of GOOGL, increasing its weighting to about 1.55% from 1.15%. We're stepping in again as Alphabet shares continued to pull back from their February highs. Our previous purchase was last Tuesday at around $318 per share. Alphabet has now pulled back about 9% since reporting earnings a few weeks ago. We thought the results were fantastic, with a healthy revenue and earnings-per-share beat, driven by accelerating revenue growth in Search and Google Cloud. But the main issue â and this has impacted all the major megacap tech stocks over the past few weeks â is that free cash flow is drying up due to ambitious capital expenditure plans. The Google parent said it plans to spend $175 billion to $185 billion in capex in 2026 â well above the Street's estimate of $115 billion and the $91 billion spent last year. GOOGL 1Y mountain Alphabet 1 year It's taking time for the market to get comfortable with this level of spending and shrinking of free cash flow. Alphabet generated low $70 billion in free cash flow in both 2024 and 2025, but that figure is expected to drop to about $33 billion in 2026, according to FactSet. For comparison, the Street is currently modeling just $6 billion of free cash flow at Meta Platforms and a $10 billion outflow at Amazon , according to FactSet. Microsoft is expected to generate about $65 billion of free cash flow over the next four quarters. Time will tell if the hyperscale capex spree will pay off, but we think Alphabet has a more visible path to victory compared to its peers, and that's why it's our "Magnificent Seven" stock of choice to buy in this broader tech selloff. Google Search revenue is seeing a lift from AI, driven by increased engagement with AI-powered queries. In the cloud, we think Google Cloud is taking share from peers based on the 55% year over year growth in its backlog, which ended the year at $240 billion. (Jim Cramer's Charitable Trust is long GOOGL, META, AMZN, MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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We're scooping up more shares of this recently banged-up megacap AI leader

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