Google value plunges by $500bn as AI fears rattle Wall Street

Alphabet, the parent company of Google, saw its stock value drop by nearly $500 billion in a single day due to investor concerns over the impact of artificial intelligence (AI) on the company's growth. Despite a 25% increase in total revenue to $127.6 billion, profits fell by 25%, leading to negative free cash flow of over $9 billion.

This spending spree is primarily driven by Google's AI investments, specifically the AI summaries now appearing in Google Search results, which have reduced ad revenue. Microsoft and Amazon also released disappointing results this week, with both companies announcing plans to maintain large-scale AI spending. While Amazon revealed a staggering cash flow loss of $42 billion, its revenue grew by 11% to $201 billion.

Microsoft, on the other hand, showed a 19% revenue increase to $92.3 billion, with a 30% growth in its cloud business. However, the company's stock did not react as positively as Alphabet's and Amazon's. Analysts suggest that the challenge lies in balancing AI investments with maintaining the strength of existing businesses, highlighting the uncertainty surrounding the future value captured by AI.