Alphabet shares plunge 12% as AI costs erase $500 billion in value

Google's stock price crashed on Thursday, with parent company Alphabet finishing the day down over 12 percent, wiping $500 billion from its value in the biggest drop in the company's history. The plunge followed disappointing earnings in search advertising and revealed the scale of Alphabet's massive AI spending, which produced negative free cash flow of $9.1 billion against expectations of near breakeven. Total revenue of $127.6 billion missed analyst targets, while ad revenue fell $1.4 billion short, though cloud revenue more than doubled to $30.71 billion. The crash is second only to Nvidia's $593 billion plunge last year amid concerns about US AI competitiveness. Alphabet plans to significantly increase 2027 capital expenditures from this year's $195-205 billion forecast, and investors worry the AI bets may not pay off. Rival Microsoft saw shares rise over 5 percent on positive cash flow.