Alphabet shares suffer record 12% drop on AI spending and weak sales

Shares of Google's parent company Alphabet fell more than 12% on Thursday, their worst single-day drop on record, erasing roughly half a trillion dollars in market value. The decline, larger than any day during the Covid-19 pandemic or 2008 financial crisis, followed quarterly sales that missed expectations. Investors worry that AI chatbots are displacing traditional search faster than Google can adapt, while the company's capital expenditures on AI infrastructure reached $51.4 billion in the third quarter alone. Alphabet also reported a second consecutive quarter of negative free cash flow, a first since going public in 2004, contrasting with Microsoft's $18.6 billion in positive free cash flow. The market is increasingly punishing companies seen as spending irrationally on AI.