A steep sell-off in Google’s parent company followed slower search growth and climbing artificial intelligence expenses.
Alphabet lost approximately $500 billion in market value Thursday as investors reacted to slowing growth in search advertising and soaring costs tied to artificial intelligence. Shares of Google’s parent company dropped as much as 15.8% during the day, according to NBC News, before closing down 12.64% at $283.82, Fox News reported.
The decline wiped roughly $499.8 billion off the firm’s market capitalization by the close of trading, with intraday losses topping $550 billion. The drop marks the largest single-day market value wipeout in Alphabet’s history and the second-largest in Wall Street history, behind only Nvidia’s $589 billion loss in January 2025. Alphabet remains the fourth-largest company in the United States by market value, standing above $3.4 trillion.
Why the search slowdown matters
The sell-off followed Alphabet’s third-quarter earnings report on Wednesday, which showed total revenue of $127.6 billion. While that represented a 25% increase compared with the same period a year earlier, the total fell short of Wall Street estimates.
Advertising sales in the core Google Search division drove much of the disappointment. Search revenue grew 12% from a year earlier, down from 17% growth in the second quarter. In a research note released Thursday morning, analysts at JPMorgan Chase said the magnitude of the slowdown was “steeper than expected.”
Company leadership attributed part of that softness to its own product changes. Senior vice president Philipp Schindler told investors that search ad revenue underperformed partly because Google’s AI Mode feature presents fewer commercial advertisements. Schindler said the company is trying to fix the issue and noted that early tests have “shown promising results.”
Heavy spending against surging cloud revenue
Alphabet sought to balance the ad weakness by pointing to expansion elsewhere. The company revealed that its Gemini artificial intelligence application now has more than 1 billion users. Its cloud computing division also delivered strong numbers, with Google Cloud revenue surging 103% year over year to $30.7 billion, topping consensus estimates of $29.2 billion.
Even so, the scale of capital needed to run those systems raised alarms. Alphabet spent $51.4 billion on capital expenditures during the third quarter alone, directing the money into data centers and specialized computing infrastructure. Chief financial officer Anat Ashkenazi told investors that Google Cloud profit margins could experience near-term pressure because the company must buy third-party computing capacity to keep up with customer demand.
Alphabet previously disclosed commitments to more than $1 trillion in multi-year contracts covering infrastructure, power and leases for AI networks. That commitment follows a June capital raise of nearly $80 billion and a July announcement outlining plans to spend more than $200 billion across the full year, doubling its 2025 expenditure.
Impact on the wider market
Alphabet’s plunge dragged down broader stock indexes and linked tech shares on Thursday. The Nasdaq Composite dropped 1.6% by mid-morning, while the S&P 500 fell 0.6%. The Philadelphia semiconductor index slipped 1.6% as investors sold shares of chip suppliers that equip data centers.
Other tech giants felt the pressure as well. Microsoft shares briefly gained ground following its own quarterly earnings report on Wednesday night, but reversed direction Thursday morning to trade down roughly 2%.
The pressure extended into heavy industry. Shares of construction equipment manufacturer Caterpillar fell 9% early Thursday. The company supplies machinery for building data centers and beat quarterly revenue forecasts, but investors punished the stock because the beat was narrower than traders expected.
What happens next
Alphabet management projected that capital expenditures for the full year will finish between $195 billion and $205 billion. The company stated that capital spending will climb substantially higher in 2027 as it continues to construct infrastructure for AI services.
The retreat broke Alphabet’s previous record for a one-day market value drop, which was set in July when the stock lost approximately $275 billion.
