Alphabet loses $500bn in value as AI impacts search revenue

Published Google parent Alphabet lost just over $500bn (£374bn) in value on Thursday after it rattled Wall Street with its last update of the year on its business operations. Google spooked investors so badly that its stock hit a six-month low, after it revealed its artificial intelligence (AI) summaries on search were affecting ad revenue ^[1].

Key facts * Alphabet's total stock market value fell to $3.46 trillion from $3.97 trillion in a single day ^[1]. * The company showed negative free cash flow in excess of $9bn, marking the second time in its history as a public company ^[1]. * Google's search engine now defaults to AI summaries, which has impacted the number of advertisements the company was able to sell ^[1]. * Profits at Alphabet fell by 25% during the quarter despite total revenue growing 25% to $127.6bn ^[1].

Why did the stock price drop? Investors appeared dismayed at the impacts that massive AI investments are having on the ability of tech giants to keep growing their core lines of business ^[1]. While total revenue grew, profits fell by a considerable 25% during the quarter ^[1]. This decline is linked to the fact that Google's search engine now defaults to AI summaries, which has hit the number of advertisements sold ^[1].

What are the company's financial results? Alphabet reported total revenue of $127.6bn, buoyed by Google Cloud revenue which grew by 103% to almost $31bn ^[1]. This spending is almost entirely dedicated to Google's AI investments ^[1].

How do other tech companies compare? Microsoft and Amazon also updated investors this week with plans to keep spending astronomical sums of cash in an ongoing AI race ^[1]. Amazon's stock fell 6% in after hours trading following results that showed a staggering cash flow figure of negative $42bn ^[1]. Chief executive Andy Jassey claimed the business was spending because it had the chance at two businesses that could bring in $1 trillion for Amazon in the future ^[1].