Alphabet’s market capitalization plunged by $500 billion on Thursday as the stock dropped more than 11% – on track for its worst loss ever as AI chatbots eat into Google’s Search business.
asserted
chatbots → plunge → business
If the stock closes down more than 9.77% in Thursday’s session, it will be the worst reaction in the company’s 22-year history and the second-largest single-day loss of any stock.
asserted
it → close → stock
Nvidia currently holds the record with a roughly $589 billion loss on Jan. 27, 2025.
asserted
Nvidia → hold → Jan.
In the third quarter, Alphabet reported its first double miss for both earnings per share and revenue since the end of 2022 as AI chatbots hit its core Google Search business.
asserted
chatbots → report → business
The company also disclosed that it has been burning through cash faster than expected.
asserted
it → disclose → cash
Investors sounded the alarms over the miss, since the high-margin Search business typically provides much of the funding that Alphabet has been using to spend big on the AI build-out.
asserted
Alphabet → sound → out
“This may be the quarter we feared,” Gil Luria, head of technology research at D.A. Davidson, told CNBC, nodding to concerns that AI agents will steal business from traditional search engines.
uncertain
agents → fear → engines
Total revenue for the third quarter was $127.6 billion, missing estimates of $128.2 billion.
asserted
revenue → miss → billion
Net income fell 25% to $26.17 billion.
asserted
income → fall → billion
Adjusted earnings per share of $2.67 also missed expectations of $3.02.
asserted
earnings → miss → 3.02
Alphabet’s cloud business made $30.7 billion, beating analysts’ expectations.
asserted
business → make → expectations
But its services business – which includes Search – recorded $96.3 billion, missing estimates of $98.5 billion.
asserted
which → include → billion
Revenue from Google’s Search grew just 12% in the third quarter over the past year, down from 17% in the second quarter and 19% in the first quarter.
asserted
Revenue → grow → quarter
It also missed forecasts for the second straight quarter.
asserted
It → miss → quarter
Chief Financial Officer Anat Ashkenazi announced that capital expenditures will increase significantly next year, largely driven by the AI race – even as the tech giant revealed it has been flying through its cash reserves.
asserted
it → announce → reserves
Alphabet reported negative free cash flow of $9.07 billion in the third quarter, worse than Wall Street expectations that it would come close to breaking even.
asserted
it → report → expectations
The company had revealed a negative cash flow of $5.9 billion in the second quarter, marking the first time it fell into the red since the company went public in 2004.
asserted
company → reveal → 2004
It’s just one of the many companies spending billions on AI research and computing power, eager to build up troves of compute and lease the capacity out to other companies.
asserted
It → ’ → companies
Alphabet reported a $7.66 billion operating income loss in “Alphabet-level activities,” which it said is largely related to AI development.
asserted
it → report → development
Microsoft, meanwhile, reported $45.2 billion in capital expenditures in the third quarter – 30% higher than the same time last year but significantly below expectations of $50.67 billion.
asserted
Microsoft → report → billion
It also lowered its full-year spending forecast to $170 billion.
asserted
It → lower → billion
The company’s free cash flow fell 27% to $18.63 billion, but remained positive.
asserted
flow → fall → billion
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asserted
business → meet → inbox
Azure, its cloud computing sector, jumped 48% to become the company’s largest business.
asserted
Azure → jump → ?
The spending pullback initially came as a welcome reprieve for investors, who have been concerned that companies are spending too heavily on AI.
asserted
companies → come → AI
But shares of Microsoft ultimately fell 1.4% as traders took the slowdown as a sign that the company is not expecting blowout returns from AI investments anytime soon.
asserted
company → fall → investments
It also weighed on other “neocloud” stocks – a name for companies that rent out AI computing capacity.
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that → weigh → capacity
Shares of IREN and Nebius fell 4% and 2.8%, respectively.
asserted
Shares → fall → IREN
The Nasdaq plummeted 1.1% Thursday as Google’s Search revenue weighed on other tech and AI stocks.
asserted
revenue → plummet → stocks
The Aporia
