Alphabet lost just over $500bn in value on Thursday after revealing that its artificial intelligence search summaries are reducing advertising revenue, the BBC reported on Friday. The company's market capitalisation fell to $3.46 trillion from $3.97 trillion the previous day, as shares dropped over 12 per cent to a six-month low.
Chief business officer Philipp Schindler said Google's AI mode, which answers questions conversationally, was eating into revenue from advertisements that appear alongside traditional search results. The firm's total revenue grew 25 per cent in the three months to the end of September, reaching $127.6bn, but fell short of analyst expectations, particularly in its advertising arm.
Kim Scott, who formerly led Google's advertising business, told the BBC that the company would rather have its own AI summaries reduce search revenue than allow competitors to do so. She said Google was making a long-term bet on AI, consistent with the firm's history of backing technology that may hurt short-term performance.
Amazon's shares fell 6 per cent in after-hours trading on Thursday after the company reported quarterly sales growth of 11 per cent, hitting $201bn, alongside a cash flow figure of negative $42bn. That number shows Amazon is spending more money than it makes, with spending increasing six-fold over three months. Chief executive Andy Jassy said the business was investing because it had the chance at two businesses that could each bring in $1 trillion in future.
Microsoft's shares fell by less than 1 per cent on Thursday. The company spent around $5bn less on AI-dedicated investments and revealed plans to cut thousands of workers earlier in the week. Its revenue grew 19 per cent from a year earlier, reaching $92.3bn for the quarter, with its cloud business growing by 30 per cent to $63bn.
Why it matters for wealth
The simultaneous market reactions to Google, Amazon and Microsoft highlight investor concern about returns on AI spending. Tracy Woo, a principal analyst at Forrester, said Alphabet's results show the challenge of funding massive AI investments while maintaining established businesses. The question of where AI value will ultimately be captured remains unanswered, affecting valuations across tech-heavy portfolios.
Source: BBC News
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