Alphabet loses $500bn in value as AI ad fears hit tech stocks

· Tech · United States

Alphabet shares plunged nearly 13% on Thursday, its worst day ever, wiping about $500 billion off its market value and hitting a six-month low after the company reported a larger negative free cash flow than analysts expected while maintaining its spending guidance. Investors were also rattled by Alphabet's disclosure that its AI search summaries were affecting advertising revenue. The record drop dragged the wider tech sector lower and revived fears about the cost and returns of artificial intelligence. The sell-off came as another round of disappointing earnings fuelled a rotation out of the AI trade, with heavy spending raising doubts about returns.

Why it matters：If AI features cannibalise the advertising that funds them, the business case for the industry's vast AI spending weakens, with knock-on effects for markets and the wider economy.

Key points

  • Alphabet fell about 13%, its worst day ever, losing roughly $500 billion.
  • The company reported larger negative free cash flow than expected.
  • It said AI search summaries were affecting ad revenue.

Sources (original reporting)

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