Google value plunges by $500bn as AI spending rattles Wall Street
Google lost $500bn in value on Thursday.
The short version
- Its new AI search summaries hurt ad sales.
- Profits fell 25 percent in the quarter.
- Amazon and Microsoft also reported massive AI spending.
- Wall Street is worried about the heavy cash burn.
Why it matters to you. For your business, heavy tech spending means the biggest companies are betting their futures on AI, changing how ads and search work on the screens your customers look at every day.
Google parent Alphabet lost just over $500bn in value on Thursday after it rattled Wall Street with its last update of the year on its business operations, according to the BBC. Google spooked investors so badly that its stock hit a six-month low, after it revealed its artificial intelligence summaries on search were affecting ad revenue.
At first glance, total revenue grew 25 percent compared to last year, hitting $127.6bn, buoyed by the ongoing success of Google Cloud. However, profits fell by a considerable 25 percent during the quarter, and the company showed negative free cash flow in excess of $9bn.
That new level of spending is almost entirely dedicated to Google's AI investments, meaning Alphabet is now spending more money than it is bringing in. By the end of Thursday, the company's total stock market value had fallen to $3.46 trillion from $3.97 trillion the day before.
Amazon, the warehouse store chain, also took a hit on Thursday after it shared a staggering cash flow figure of negative $42bn. Chief executive Andy Jassy defended the spending, saying it would forever change the size and revenue of Amazon. Microsoft, the software giant, spent around $5bn less on AI investments, while its revenue grew 19 percent from a year earlier, hitting $92.3bn.
Chief executive Satya Nadella said the use of Copilot, Microsoft's AI chatbot and tool, has seen daily users grow by 500 percent from a year ago.
Photo: Asoundd, CC BY-SA 4.0, via Wikimedia Commons
