Alphabet's $500 billion rout: AI spending spooks investors as search growth slows

Alphabet, Google's parent company, lost about $500 billion in market value after its shares plunged nearly 13 percent on Thursday, the worst single-day drop in its history, following third-quarter results that missed Wall Street expectations. The sell-off was driven by slower search revenue growth and heavy AI investments. Google Search revenue grew 12 percent year-on-year to $63.35 billion, a slowdown from 17 percent in the previous quarter, while advertising revenue fell short of expectations by $1.4 billion. Alphabet's free cash flow turned negative at $9.07 billion for the second consecutive quarter, as capital expenditure on AI infrastructure surged, with plans for significant increases in 2027. Google Cloud revenue more than doubled to $30.71 billion, but this was not enough to offset concerns about the core advertising business and rising costs. The rout reflects a broader investor shift toward demanding financial returns from AI spending, a trend also affecting Microsoft and Amazon.