Alphabet falls nearly 10% as $9 billion AI-stake loss hits earnings

Both companies rent computing power to AI labs and hold stakes in them, so the same boom shows up on both sides of their books. This quarter, the accounting split the market's reaction almost in opposite directions.

Microsoft's exposure to those labs surfaced as revenue: OpenAI paid it $10 billion in the quarter ended in September, according to its filing, and the labs' unpaid bills to Microsoft rose to about $7 billion. Alphabet's stakes moved the other way, converting into a nearly $9 billion loss driven primarily by SpaceX, whose stock dropped about 12% during the quarter, according to CFO Anat Ashkenazi.

Alphabet is also carrying the construction bill, spending $51 billion on data centers and equipment and burning about $9 billion in free cash flow, which it covered partly by selling about $29 billion of bonds and $12 billion of new shares while nearly tripling long-term debt this year. The payoff is visible in Google Cloud, where revenue doubled to about $31 billion and the backlog of signed contracts rose to $561 billion from $514 billion three months earlier.