Google parent company haemorrhages $700 billion in worst-ever day
The value of Google’s parent company plummeted by more than half a trillion US dollars in a single day as investors’ doubts about tech giants′ AI spending splurge deepened.
In Thursday’s US trading session, Alphabet shares tumbled more than 12 per cent, wiping more than $US500 billion (roughly $712 billion) from its market capitalisation, down from $US3.97 trillion to $US3.46 trillion.
Google has suffered through its worst-ever day on the sharemarket. AP/AAP
It was the company’s worst-ever day on the stock exchange, and the second worst in trading history, behind only the almost $US600 billion loss Nvidia suffered early last year.
The sell-off came on the back of a weaker-than-expected earnings update from Alphabet, when the tech giant revealed it had burnt more cash than it brought in for the second straight quarter.
Analysts had expected free cash flow to come in at negative $US2.7 billion. Instead, it was $US9.07 billion, almost twice as much as the $US5.9 billion it had lost the previous quarter.
Before this year, Alphabet (or Google, before it was renamed in 2015) had never recorded a single quarter of negative cash flow in more than 20 years of being a publicly listed company.
Much of the result was driven by the company’s huge spending on artificial intelligence. It recorded $US51.4 billion in capital expenditures in the third quarter alone, compared to $US91.4 billion for all of 2025.
Ironically, it was the impact of AI on Google’s core business that contributed to much of the sell-off.
The company’s biggest cash cow has long been its dominance as the world’s leading search engine, and the volume of ads – and therefore revenue – that generates.
However, Google’s move to replace its traditional search pages with AI-generated results – and users turning to other companies’ AI products for information online – is leading to fewer ads being served to its users.
While search advertising grew 12 per cent to $US63.35 billion, for the second straight quarter that was worse than what analysts had expected.
Traditional Google search is being increasingly replaced by its own AI products – and those of its competitors. AP
Investors are worried the change in that space might happen “faster than Google can react to it and pivot their business,” Jed Ellerbroek, portfolio manager at Argent Capital Management.
“Worries are weighing on the entire AI industry following a frenzy to build data centres and fill them with AI chips,” Commonwealth Bank said in a research note.
“Not only are concerns high that the AI revolution may not produce as much profit and productivity as hoped, future spending on data centres is also under pressure because of how expensive it’s become to borrow money to buy more chips.”
Alphabet is such an influential stock that, while about four out of every five companies in the S&P500 rose on Thursday, the overall index finished 0.3 per cent lower.
However, it wasn’t all bad news for Google’s parent, as revenue grew 25 per cent to $US127.6 billion.
A particular source of success was Google Cloud, where revenue more than doubled to about $US31 billion.
Investors are beginning to question companies’ rampant AI-related spending. AP
“AI’s main beneficiary, without a doubt, is Alphabet’s cloud business,” Morningstar analyst Malik Ahmed Khan said.
“Not only is the segment’s growth stellar, its backlog, or future contracted revenue, is five times annualised quarterly sales, providing the business great visibility as it invests in AI infrastructure …
“We believe that investors are underappreciating the breadth and depth of Alphabet’s AI monetisation and the rapid upcoming growth in Google Cloud.”
Despite sell-off, Alphabet remains one of the most valuable companies in the world – although it slid one spot to number four, overtaken by Microsoft.
The latter company earlier this week announced plans to offer redundancies to about 60,000 employees – about a quarter of its entire global workforce.
Its shares traded largely flat on Thursday after it beat earnings and revenue expectations in its own update.
Meanwhile, fellow tech giant Amazon – the fifth most valuable company in the world – shed 7 per cent in after-hours trade after forecasting weaker-than-expected sales figures for the upcoming quarter at the same time it’s spending big on AI.
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