Alphabet erases a record US$500 billion as AI eats into sales
Alphabet lost more than US$500 billion in market value in a single morning, its biggest-ever wipeout, after the Google parent reported third-quarter sales that fell short of analyst forecasts and its chief business officer said AI queries carry lower monetization.
Sales excluding partner payouts came in at US$111.2 billion, below projections, while advertising from search and other channels — roughly half of total revenue and the cash engine behind Google's AI spending — grew at its slowest pace in five quarters. Shares fell 13 per cent to US$281.37 by 9:35 a.m. in New York.
Chief business officer Philipp Schindler told investors on the earnings call that the growing popularity of AI Mode, a new tab in Google Search, had weighed on results, saying AI queries have "lower monetization". He said the company was optimistic and plans to bring more ads to that part of the search engine.
The miss sharpened the contrast with Microsoft, which reported cloud growth ahead of Wall Street's expectations while holding spending in check. JPMorgan Chase analysts including Doug Anmuth wrote that the reaction shows "the margin for error when a hyperscaler spending hundreds of billions on the AI infrastructure buildout" posts disappointing results in its core business.
Attention now turns to chief executive Sundar Pichai, who faces more than US$1 trillion in future payments for data centres, computing and energy to power his AI ambitions. "This quarter feels like a moment of truth for Alphabet: Either Pichai and his team fix the way the company monetizes AI, or the giant risks losing its leadership in several of its core businesses in the near future," said Thomas Monteiro, senior analyst at Investing.com, according to Token Times.
