Alphabet's $500 billion loss and China's worst market rout since 2016: What's driving the AI sell-off?

Alphabet shares fell over 12% on Thursday, wiping out roughly $500 billion in market value after its third-quarter results disappointed investors, marking the company's worst single-day percentage decline on record. The sell-off spread across the AI sector. Intel shares plunged over 25% on a weak revenue forecast, while Amazon faced pressure over cautious holiday sales guidance and negative cash flow of $42 billion. Alphabet also reported negative free cash flow for a second straight quarter, with executives admitting AI Mode generates lower advertising revenue than traditional search. China's CSI300 index fell 8.5% in October, its steepest monthly drop since early 2016, erasing about $480 billion from AI and semiconductor leaders. Morgan Stanley expects AI infrastructure spending to exceed $1 trillion next year, with rising borrowing costs adding to investor concerns about when massive investments will yield returns.