Alphabet sheds $500bn as AI search dents ad sales

The drop came after Alphabet's quarterly results on Wednesday, which showed revenue growing 25% year-over-year to $127.6bn but falling short of analyst expectations, especially in advertising. The stock fell over 12% to a six-month low. Kim Scott, who formerly led Google's advertising business, told the BBC that Google would rather eat its own lunch than let someone else eat it, describing the AI push as a long-term bet even if it hurts short-term results.

The concern extends beyond Google. Amazon and Microsoft both reported this week and signaled continued heavy AI spending. Amazon's shares fell 6% in after-hours trading despite 11% sales growth to $201bn, as it reported negative $42bn cash flow. Microsoft's shares fell less than 1% after it spent about $5bn less on AI investments and shared plans to cut thousands of jobs. Forrester analyst Tracy Woo said Microsoft's results point to a much bigger question facing the technology industry: where AI value will ultimately be captured.