Shares in Alphabet Inc., the parent company of Google, dropped more than 12% on Thursday, marking the company’s worst single‑day loss in market value ever. The fall erased roughly $500 billion from the tech giant’s market capitalization, making it the second‑largest daily decline after Nvidia’s $593 billion loss on 27 January 2025.
The slide followed Alphabet’s latest quarterly earnings, which revealed that the firm is burning through cash in its artificial‑intelligence (AI) push and that Google’s search division is losing ground to AI‑driven competitors. Search revenue growth fell short of forecasts by almost three percentage points, coming in at 12%.
Investors were also alarmed by a negative free cash flow of $9.07 billion for the third quarter, more than triple the amount expected. Negative free cash flow occurs when a company’s cash outflows for operating activities and capital expenditure exceed the cash generated from core operations.
Alphabet’s chief executive Sundar Pichai said ad queries were growing at their fastest pace in five years, but that was not enough to stem the decline. The company faces a record $205 billion investment bill this year alone as chatbots and agents reshape how people search for information.
Market analysts warned that the sharp drop serves as a reminder for tech companies to avoid missing earnings forecasts amid growing investor unease over lofty valuations in the AI space. The broader trend shows that tech giants like Meta and Alphabet have seen their market capitalisations dip year‑to‑date.
Funding for the AI boom is under scrutiny as borrowing costs rise globally. The rush for investment has prompted companies such as SpaceX to go public to raise cash, and AI firms like Anthropic are eyeing IPOs to secure capital. The market’s appetite for AI‑related debt‑fueled ambition remains uncertain, with investors demanding proof of value.
Research director Kathleen Brooks of XTB noted that investors are wary of the cost of AI payoffs, citing Alphabet’s two quarters of negative cash flow as unacceptable. She added that the AI trade is not moving as a unified block and that sentiment will be tested further as Microsoft, Amazon and Apple report results in the coming days.
Alphabet’s stock is expected to recover as the market digests the earnings report and reassesses the company’s long‑term AI strategy. Investors will be watching closely for any signs of cost control and revenue growth in the next quarter.
