Alphabet Sheds Half a Trillion in Market Value in Stock’s Worst Day Ever

Google’s stock suffered its worst day on record Thursday as investors confronted the reality that a company that has long been a dynamo of growth and profits faces painful trade-offs from the artificial-intelligence transition.

The slide erased roughly $500 billion from Alphabet’s market value. It also weighed on major U.S. stock indexes, fueling a decline in the Nasdaq composite and amplifying fears that the costs of the global AI build-out may be outrunning the returns.

Google also reported greater-than-expected operating expenses and negative free cash flow, highlighting the staggering costs the company is incurring as it races to secure data center capacity and develop new AI models.

Google Search revenue grew 12% year over year in the third quarter, down from 17% growth in the second quarter and 19% in the first quarter.

The slowdown highlights a challenge for Google: how to remake its cash-cow search business around AI without cannibalizing it. It also spooked Wall Street, which has signed off on Big Tech’s AI spending spree in part because the core businesses at companies like Google, Microsoft and Amazon.com are reliable profit-printing machines.

“One of the companies most aggressively investing in AI to protect its core businesses showed vulnerability to AI,” Mike O’Rourke, chief market strategist at JonesTrading, said of Google’s report. “That’s why people are disappointed.”

The tumble in Google’s share price was so stark on Thursday that the stock completed a so-called death cross, when the 50-day moving average of a share price drops below the 200-day moving average. Some analysts view that severe loss of momentum as a signal that the price has further to fall.