On 29 October, the American corporation Alphabet, Google’s parent company, lost around $500 billion in market capitalisation in a single trading session. The tech giant’s shares plummeted by 12.6% following the publication of its quarterly results, which raised concerns amongst investors due to the huge expenditure on artificial intelligence.
- On 29 October, Alphabet’s share price plummeted by 12.6%, and the company’s market capitalisation fell by approximately $500 billion.
- The fall was the sharpest for shares in Google’s parent company since it went public in 2004.
- Alphabet’s quarterly revenue stood at $127.6 billion, falling short of analysts’ expectations.
- The company’s capital expenditure reached $51.4 billion, whilst free cash flow turned negative at $9.1 billion.
- Despite the slump in share prices, Google Cloud’s revenue rose by 103% to $30.7 billion.
Why did Google’s share price plummet?
The main reason for the sell-off was Alphabet’s financial results for the third quarter of 2026, which fell short of Wall Street’s expectations.
The company reported revenue of $127.6 billion, whilst analysts had forecast $128.2 billion. Advertising revenue stood at $82 billion, compared with the expected $83.4 billion.
Investors were particularly concerned by the slowdown in the growth of the search engine business Google.. Revenue from search and related services increased by 12% — compared with 17% in the previous quarter.
Google’s Chief Commercial Officer, Philipp Schindler, attributed the slowdown in advertising revenue to the growing popularity of AI Mode — an AI-powered search mode that, for the time being, generates less advertising revenue.
Google is spending record amounts on artificial intelligence
Despite a 25% increase in total revenue, Alphabet faced a significant outflow of funds due to the construction of data centres and the purchase of AI equipment.
The company’s capital expenditure for the third quarter totalled $51.4 billion. Free cash flow turned negative, standing at minus $9.1 billion.
At the same time, Google Cloud’s cloud division posted record growth: its revenue rose by 103% to $30.7 billion.
Alphabet’s Chief Financial Officer, Anat Ashkenazi, has warned that the company’s capital expenditure will continue to rise significantly in 2027. For 2026, it is forecast to be in the range of $195–205 billion.
The scale of spending on artificial intelligence has already become one of the main topics in the technology market. Previously, UkrMedia analysed investments worth trillions in AI infrastructure and the risks associated with their payback.
Google’s slump dragged down the US stock market
Alphabet’s fall affected the main US stock indices. At the close of trading on 29 October, the tech-heavy Nasdaq fell by 1.4%, whilst the S&P 500 lost 0.3%.
The sell-off in Google shares has heightened investors’ concerns about whether the largest technology companies will be able to recoup their multi-billion investments in artificial intelligence infrastructure.
However, a loss of $500 billion in market capitalisation does not mean that Google has actually spent or lost that amount in cash. It refers to a reduction in the company’s market value due to a fall in its share price.
