Alphabet Just Slashed Its Stake in This Monster Artificial Intelligence (AI) Cybersecurity Stock. Should You Follow?

Alphabet (GOOGL) significantly reduced its stake in CrowdStrike (CRWD) by 83% in Q1 2025, selling 781,559 shares. The move appears driven by strategic reasons, including profit-taking after a 43% rise in CrowdStrike's share price since the end of Q1 2024 and potential reallocation of capital following Alphabet's acquisition of Wiz, which may allow it to compete more directly in the cloud-based cybersecurity space. Despite the sale, the author views CrowdStrike as a compelling opportunity in the AI and cybersecurity sectors, though its price-to-sales ratio is high relative to peers.

Analysis

Alphabet executed a significant reduction in its CrowdStrike holdings during Q1 2025, divesting 83% of its stake to 74,230 shares, marking a notable change after three quarters of consistent holdings. This move followed a substantial 43% appreciation in CrowdStrike's share price since the end of Q1 2024, outperforming both the S&P 500 and Nasdaq Composite, as well as many cybersecurity peers. The divestment is likely attributable to two primary factors: opportunistic profit-taking on the back of this strong share performance, particularly as CrowdStrike's recent financial guidance was underwhelming, and a strategic repositioning by Alphabet following its acquisition of Wiz, which could enable it to compete more directly with CrowdStrike in the cloud-based cybersecurity arena. CrowdStrike currently trades at a high price-to-sales (P/S) multiple of 28.8, which is considerably above its peer group average and widening, though this is still 56% below its five-year high and reflects a recovery to levels preceding a software bug incident last summer. Despite Alphabet's sale, the article's author views CrowdStrike as a potentially compelling long-term opportunity at the intersection of AI and cybersecurity, suggesting its valuation may be reasonable when considering longer-term trends, even if it was not recently highlighted as a top buy by a specific analyst team.

Key Decisions for Investors

• Investors should carefully evaluate the implications of Alphabet's substantial divestment from CrowdStrike, which may signal concerns about near-term valuation or increased competitive pressure from Google's deepened cybersecurity offerings via Wiz.
• Closely monitor CrowdStrike's upcoming financial reports and market share trends, particularly in light of its elevated price-to-sales ratio of 28.8 relative to peers and the strategic shift from a major technology player like Alphabet.
• Consider that while CrowdStrike's valuation has rebounded and remains below its historical peak, its current premium warrants careful scrutiny of its growth sustainability and ability to navigate a potentially intensifying competitive landscape, especially against the backdrop of Alphabet's reduced exposure.