By Basant El-Faramawy
Shares of Google parent company Alphabet sank more than 12% on Thursday, marking its worst one-day performance ever and wiping out over $500 billion in market value. The drop ranks as the second-largest single-day wipeout in market history, behind only Nvidia's $589 billion decline in 2025. Alphabet, America's fourth-largest company valued at $3.42 trillion, saw the sharp decline reflect growing Wall Street anxiety over how long massive artificial intelligence investments will take to generate consistent returns.
Earnings Miss and AI Mode Impact
Alphabet reported quarterly results Wednesday that fell short of revenue expectations, with particularly lackluster advertising sales. JPMorgan Chase analysts described the slowdown in Google's search business as "steeper than expected." Senior Vice President Philipp Schindler told investors that part of the ad revenue underperformance stemmed from Google's own "AI Mode" search feature, which results in fewer ads being shown. Schindler added that ad experiments within the feature have shown promising results.
Massive AI Spending Commitments
The company disclosed it has committed to more than $1 trillion in multiyear spending agreements to fund infrastructure, energy, and leases required for AI systems. Alphabet plans to spend over $200 billion this year, double its 2025 expenditure, and raised nearly $80 billion in June to support the expanding AI build-out. Executives highlighted more than 1 billion users of the Gemini AI app to soften investor concerns.
Broader Market Fallout
The sell-off dragged the Nasdaq Composite down 1.5% and the S&P 500 down 0.4%. Chip stocks supplying AI data centers followed Alphabet lower, with the Philadelphia semiconductor index dropping 1.6%. Construction equipment giant Caterpillar, a key supplier for data center builds, plunged 9% despite beating revenue expectations, becoming the second-worst performer in the Dow Jones Industrial Average behind Alphabet. The Dow declined over 200 points.
Microsoft Contrast
Alphabet's disappointing results contrasted with better earnings from peer Microsoft, whose shares initially rose in after-hours trading Wednesday before reversing to fall about 1.5% by Thursday afternoon.
