Alphabet, Google's parent company, suffered a major stock market decline after its latest quarterly earnings raised concerns about the financial impact of its artificial intelligence investments. The company lost more than $500 billion in market value in a single day, sending its shares to their lowest level in six months.
One of the biggest concerns is Google's AI-powered search feature, known as AI Mode. The tool provides users with direct, conversational answers instead of traditional search results. This could reduce the number of people clicking on sponsored links, putting pressure on Google's main advertising business.
Google Chief Business Officer Philipp Schindler acknowledged that AI Mode is affecting the company's traditional search advertising model. Kim Scott, a former Google advertising executive, told the BBC's Today program that Google would rather disrupt its own business with new technology than allow competitors to take its market share.
She said the company has a history of making long-term technology investments, even when those decisions create short-term financial challenges.
"I think they're making a long-term bet on AI," she said.
The company's latest financial results added to investor concerns. Although Alphabet reported overall revenue growth, its advertising business failed to meet Wall Street expectations. Ad sales also recorded their slowest growth in five quarters, while net profit fell 25%.
Another major concern is the rising cost of developing AI technology. Alphabet has been spending heavily on data centers, advanced chips and other AI infrastructure. These investments have put pressure on its free cash flow, raising questions about how quickly the company will see financial returns.
Following the earnings announcement, Alphabet shares fell more than 12%. By Oct. 29, the company's market value had dropped to $3.46 trillion, down from $3.97 trillion the previous day.
Tracy Woo, a principal analyst at Forrester, said Alphabet's weaker search performance highlights the difficulty of balancing major AI investments while protecting its established businesses.
The situation presents a major challenge for Google: building the future of search with AI while protecting the advertising business that has powered its growth for years.
