Alphabet Loses $500 Billion as AI Spending Fears Hit Shares

About $500 billion in market value vanished from Alphabet on Thursday, after its shares fell 12.6%. It was the company’s steepest one-day drop since going public in 2004. The loss ranked Google’s parent among the biggest single-day losers in US market history. Investors were weighing a basic question: can its huge AI spending make up for weaker growth in the search business that has long paid the bills? ^1,8

That $500 billion loss followed Alphabet’s third-quarter results, released Wednesday. Search and other revenue grew 12% to $63.35 billion, below analysts’ forecast of 15% growth, while Google Cloud revenue more than doubled to $30.71 billion. The company spent $51.4 billion on major projects during the quarter, more than twice as much as a year earlier. Free cash flow—the money left after costs such as data-centre expenses—fell to negative $9.1 billion. ^3,5

That $9.1 billion shortfall has sharpened the debate over whether AI is helping or hurting Alphabet’s main business. More people are using Google Search, chief executive Sundar Pichai said, but slower sales growth has raised concern that AI summaries could reduce ad clicks. Alphabet is adding ads to those summaries, while cloud and AI chip sales offer other ways to earn from the boom. But investors still want proof that these new businesses can cover the rising costs. ^3,10

That rising bill also matters to lenders. Credit-market measures of the cost of protecting Broadcom and SpaceX debt against default reached record highs, as investors braced for more borrowing across the tech sector. Alphabet’s spending on major projects is expected to rise further in 2027, and the company has not shown that its AI investments will repay their cost. Its next test is whether coming results show search growth recovering and AI spending bringing in cash, not just producing new products. ^2,5