Worst Day Ever For Alphabet

Google shares plunged 13% Thursday, their worst day on record, wiping roughly $500 billion from Alphabet’s market value as investors weighed the risks of AI to the company’s core search business—and the mounting cost of competing in the technology.

The selloff also dragged on major U.S. stock indexes, deepening concerns that spending on the global AI build-out may be growing faster than the returns. Investors have supported Big Tech’s AI investments partly because companies such as Google, Microsoft and Amazon have long-running businesses that generate dependable profits.

Google’s parent company reported Wednesday that Google Services—which includes search advertising, YouTube and subscriptions—brought in $96.3 billion, below Wall Street’s $98.5 billion expectation. Search revenue rose 12% year over year in the third quarter, slowing from 17% in the second quarter and 19% in the first.

The results point to a difficult balancing act: Google must reshape its lucrative search business for AI without undermining the business that funds its expansion. The company also reported higher-than-expected operating expenses and negative free cash flow as it races to secure data-center capacity and develop AI models.

“One of the companies most aggressively investing in AI to protect its core businesses showed vulnerability to AI,” said Mike O’Rourke, chief market strategist at JonesTrading. “That’s why people are disappointed.”