Alphabet, the parent company of Google, lost over $500 billion in market value in a single day. Investors panicked over the scale of its AI spending. Shares dropped about 13%, dragging the company from roughly $3.97 trillion to $3.46 trillion by Thursday’s close. That marked the lowest share price in six months, and the shockwave hit Amazon and Microsoft stock in the same session.
Chief business officer Philipp Schindler said Google’s “AI mode”, where it answers questions conversationally, was eating into the money it makes from ads which appear next to results to traditional search questions.
Yet, Schindler said he felt “very good about our trajectory” with an AI-focused version of the search engine.
The sell-off followed Alphabet’s third-quarter results. Total revenue climbed 25% year on year to $127.6 billion. Google Cloud brought in $30.7 billion and posted $11.1 billion in profit, both above analyst estimates. However, net profit still fell 25% in the quarter, and free cash flow turned negative by $9.1 billion for a second straight quarter.
Investors see two linked worries. First, Alphabet now projects capital spending of up to $205 billion this year, more than double last year’s figure. Second, Google Search faces real pressure since AI-generated answers now sit at the top of many results. This pulls traffic away from paid ads, which are the heart of Alphabet’s core business.
Analysts say the central question is whether this AI spending will eventually translate into lasting revenue. The company is reportedly behind Anthropic and OpenAI in AI coding tools, even after releasing Gemini 4. Equity investment losses of $8.7 billion added to the pain.
Amazon slid about 6% after reporting $201 billion in quarterly sales and negative $42 billion in free cash flow. CEO Andy Jassy pointed to custom chips and the Bedrock AI developer platform as future growth drivers. Microsoft fared better, with shares dipping under 1%. CEO Satya Nadella said Copilot daily users have grown 500% year on year.
