Google shares plunge in AI panic, wiping out $500 billion

Google's parent company, Alphabet, suffered the largest collapse in its corporate history after its shares fell by more than 12 percent due to concerns over artificial intelligence spending and weakness in search advertising revenues, wiping $500 billion from its market value.

Alphabet shares closed down more than 12 percent on Thursday, recording the biggest collapse in the company's history and wiping $500 billion from its market value. This decline was recorded as the second-largest drop among US-listed companies, following Nvidia's $593 billion loss last year after the rise of China's DeepSeek AI.

The company's latest earnings report revealed disappointing earnings in its search advertising business and the full scale of massive spending in the artificial intelligence field. Investors are concerned about whether these massive investments will pay off and whether the technology sector will be able to offset these expenditures. Headquartered in Mountain View, California, the company reported a negative free cash flow of $9.1 billion at a time when analysts had expected a result close to break-even. As a result of efforts to increase cloud capacity and finance AI developments, Alphabet burned $5.9 billion in cash last quarter, turning negative for the first time in its 22 years as a publicly traded company.

While total revenue fell short of Wall Street expectations, Google Cloud revenue growth beat expectations but was not enough to offset a $1.4 billion shortfall in advertising revenues. Third-quarter total revenue came in at $127.6 billion, falling short of analysts' estimate of $128.2 billion. Advertising revenues were $82 billion, coming in below the expected $83.4 billion. Chief Business Officer Philipp Schindler attributed the larger-than-expected slowdown in search ad growth to increased use of AI Mode, a search engine chat interface where the company is still experimenting with ads. Alphabet tried to offset the weakness in advertising performance with its cloud computing unit; Google Cloud revenues exceeded forecasts, rising to $30.71 billion.

Chief Financial Officer Anat Ashkenazi stated during a conference call with analysts that Alphabet plans to significantly increase its capital expenditure forecasts for this year, which range between $195 billion and $205 billion, in 2027. Net income attributable to common shareholders fell 25 percent to $26.17 billion, while adjusted earnings per share came in at $2.67, missing Wall Street's target of $3.02. Just prior to the results, Alphabet had announced its new Gemini 4 Carbon model in an effort to dispel the perception that it was falling behind in the AI race.