The 2022 tech wreck wiped out 40% of Alphabet’s (NASDAQ:GOOG) equity value. However, 2023 has brought GOOG stock within 3% of where it was two years ago.

The company behind Google is now worth $1.33 trillion, making it the third most-valuable of the “Cloud Czars” behind Apple (NASDAQ:AAPL) at $2.6 trillion and Microsoft (NASDAQ:MSFT) at $2.1 trillion.

But neither of the two leaders are as dependent on their cloud data centers as Google, which mainly offers free services and re-sells access to its cloud.

What investors need to ask now is whether the Cloud is still worth that premium, whether the service revenue can keep expanding, and how productivity will hold up as management clamps down on spending.

Is the Golden Age Over?

Google’s “Golden Age,” the years where management could do no wrong and engineers were treated like gods, ended abruptly in January. This came after CEO Sundar Pichai announced 12,000 layoffs. Additionally, the company followed that up with demands to return to the office, reduced perks, and with limiting promotions.

In response, its Japanese employees joined a labor union. British employees staged a walkout. The layoffs amounted to a 6% workforce reduction, but employment has still more than doubled since 2017.

“Google was beloved as an employer for years. Then it laid off thousands by email,” wrote CNN, summing up the reaction. The company’s old mantra of “don’t be evil” now seems quaint and passe’.

Google’s Three Big Challenges

Despite its comeuppance, GOOG stock still faces huge challenges.

Let’s start with antitrust suits. There’s the big one against its ad business. There’s a suit against its Google Play store by Epic Games. There’s also an Indian suit against the Android operating system. Indeed, Google now has fewer programmers and a lot more lawyers, many of them former Department of Justice attorneys.

The biggest challenge comes from Microsoft in the form of generative AI systems like ChatGPT. Bots that generate full text responses have created an AI “arms race” which Google’s “Bard” seems to be losing.

Then there’s TikTok. The Chinese social networking site has entered the search ad market. Efforts in the U.S. to ban it have placed a spotlight on the use of Google itself as a spy tool. 

Is Google Overvalued?

For investors there’s only one question. Is GOOG stock overvalued? 

On April 4, Alphabet was selling for nearly 23-times earnings, close to the S&P average. Its market cap was about 4.8-times revenue. The company pays no dividend, but has $131 billion in cash and securities. Its long-term debt of $14.7 billion is relatively miniscule.

Google services like search and YouTube are where the profit is. It’s still losing money in Cloud, partly due to the costs of GMail, which remains free. The $1.9-$2.3 billion cost of layoffs will all be recognized in the March quarter, to be reported April 25. In its December quarter, profits were down by about one-third, so expect more bad news.

That said, Google retains enormous strengths. Its cloud network is now worth over $112 billion. Android still dominates Apple’s iOS in smartphone market share. And generative AI systems should save Google enormous amounts of money, providing lucrative business opportunities, even if the company starts out behind.

What To Do with Google?

I bought some GOOG stock last year while it was falling, and am still down on that investment. My guess is that, after earnings, you’ll be able to get shares for less than their current price.

But the Cloud Era hasn’t ended. With AI, it’s entering a new phase. Through the rest of this decade Google stock will do fine. It’s one of those things you buy rather than trade.

On the date of publication, Dana Blankenhorn held long positions in AAPL, GOOGL, and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.