Alphabet shares tumble in $500bn rout
Google owner admits ‘AI mode’ has hurt traditional search as sales and profits undershoot expectations
TL;DR
- Alphabet's market value decreased by a record $500 billion after its shares fell 13%.
- The company's AI spending exceeded $50 billion in the last quarter, resulting in negative cash flow of $9.1 billion.
- Google's core search advertising business showed slower growth, with 'AI mode' queries impacting monetization.
- Capital expenditure for AI reached $51.3 billion, with future commitments for data centers exceeding $1 trillion.
- Alphabet raised $85 billion in debt, a reversal from its previous share buyback strategy.
- Microsoft, in contrast, reported strong performance in its Azure cloud unit, with positive free cash flow.
- Net income fell 25% due to changes in investment values, including a loss on its SpaceX stake.
- A $5.2 billion fine for a 2018 European regulatory violation also contributed to negative cash flow.
- Alphabet's cloud business doubled its sales, benefiting from AI services demand.
- New AI models are expected to help Alphabet regain market share.