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

Alphabet's Google lost over $500 billion in value on Thursday, sparking panic on Wall Street after it revealed that its AI-powered search summaries were hurting ad revenue. The stock hit a six-month low, and Microsoft and Amazon also updated investors this week, joining Alphabet in their AI spending plans. Google's quarterly results were strong, with revenue growing by 25% to $127.6 billion, primarily driven by its cloud business.

However, profits fell by 25% and the company showed negative free cash flow of more than $9 billion, which is nearly double the loss it had just three months prior. The company's total stock market value dropped to $3.46 trillion from $3.97 trillion the day before. Google's AI features are now defaulting in search results, which negatively affected the number of advertisements it was able to sell.

Despite Google's CEO's positive outlook on the AI-driven search engine, the company's stock fell by nearly 13%. Amazon also faced a stock drop after sharing disappointing results, with a 6% decrease in after-hours trading. The company reported an 11% sales growth of $201 billion, but a staggering negative cash flow of $42 billion, indicating that its spending has increased six-fold over the span of three months.

Amazon CEO Andy Jassy claimed the company was investing heavily in AI to develop two potentially trillion-dollar businesses: its own computer chips and the AI developer platform Bedrock. Meanwhile, Microsoft's stock only slightly declined, with a less than 1% drop, despite its $5 billion less investment in AI and plans to cut thousands of workers.

The company's revenue grew by 19% to $92.3 billion, with its cloud business expanding by 30% to $63 billion. Microsoft's AI chatbot, Copilot, has seen automated tasks nearly double since July, with daily users growing by 500% from a year ago.