Why Alphabet, Google’s parent company, just lost $500 billion in a day

Alphabet, Google's parent company, recorded a $500 billion reduction in market capitalisation.

Google parent Alphabet’s shares suffered their sharpest one-day fall in history on Thursday as disappointing quarterly sales and rising artificial intelligence spending fuelled concerns about the future of Google’s search advertising business. The decline of more than 12% erased roughly $500 billion from the company’s market value.

Another US e-commerce and tech giant Amazon also recorded steep selloffs as its shares fell over 7%. Tech manufacturer Intel, too, saw its shares tumble as it logged a 23% drop on Thursday due to the unstable personal computer market, hurdles in manufacturing, ‌and heavy spending production expansion.

For Alphabet, it was the second-largest single-day loss in history, behind Nvidia’s nearly $600 billion decline in early 2025, and exceeded any daily fall Alphabet experienced during the Covid-19 pandemic or the 2008 financial crisis, reported CNN.

The selloff reflects growing investor scrutiny of Big Tech’s AI investments, particularly whether the spending will deliver sufficient returns while leaving existing businesses intact.

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Search advertising growth raises concerns

Alphabet’s quarterly sales, released on Wednesday, fell short of analysts’ expectations. Slower growth in Google’s search advertising business added to investor unease as the company continued to increase its AI spending. The results revived concerns that consumers’ growing use of AI chatbots, including Google’s own products and those of its rivals, could undermine traditional search and its advertising revenue, the CNN report stated.

Jed Ellerbroek, a portfolio manager at Argent Capital Management, said investors feared that the shift could happen more quickly than Google could adapt its business.

Heavy investment puts pressure on cash flow

Alphabet also reported negative free cash flow for a second consecutive quarter. Before this year, the company had never recorded a quarter of negative free cash flow since going public as Google in 2004. It adopted the ‘Alphabet’ name in 2015.

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Free cash flow helps companies fund dividends, buy back shares and reinvest in their operations. Its deterioration has become another source of concern for investors assessing Alphabet’s spending plans.

Capital expenditure reached $51.4 billion in the third quarter alone, compared with $91.4 billion across the whole of 2025. Spending on AI infrastructure, including data centres, is leaving less cash available for shareholder payouts.

Microsoft’s results offered a contrasting picture. Despite its own multibillion-dollar AI investments, the company reported third-quarter free cash flow of $18.6 billion this week. Its shares finished Thursday unchanged.

Richard Reyle, chief investment officer at Questar Capital Partners, said the results were beginning to reveal differences in how rationally companies were investing in AI.