Google value plunges by $500B as AI fears rattle Wall Street

Alphabet lost just over $500bn in market value after its quarterly update alarmed investors about the costs and risks of its AI push. Revenue rose 25% year over year to $127.6bn, with Google Cloud more than doubling its revenue to nearly $31bn. But company profits fell 25%, and free cash flow turned negative by more than $9bn as spending on AI surged. Investors were especially concerned that AI-generated summaries in Google Search are reducing the number of ads the company can sell, threatening its main source of income. Alphabet shares fell nearly 13%, reaching a six-month low. The results sharpened a broader concern: major technology firms may be investing heavily in AI while weakening, or failing to grow, the established businesses that finance them.

Amazon also faced a sharp investor response, with its shares down 6% in after-hours trading following 11% sales growth to $201bn and negative cash flow of $42bn. Chief executive Andy Jassy defended the spending, pointing to potential long-term opportunities in the company’s own chips and its Bedrock AI platform. Microsoft’s shares slipped less than 1% despite revenue rising 19% to $92.3bn and cloud revenue growing 30%; it reported strong growth in use of its Copilot tools while spending less on AI investment than before. Together, the updates show that demand for AI remains substantial, but investors want evidence of where its financial returns will materialize and whether they can justify enormous near-term costs.