business
Alphabet loses $500bn as AI search impacts ad revenue
Alphabet lost over $500bn in value on Thursday after its AI summaries reduced traditional search ad revenue, causing shares to fall 12% to
Key points
- Alphabet shares fell 12% to a six-month low after revealing AI summaries hit ad revenue.
- Total revenue grew 25% to $127.6bn in the quarter but missed analyst earnings predictions.
- Amazon shares dropped 6% after reporting negative $42bn cash flow despite 11% sales growth.
Why it matters. The market reaction highlights the tension between heavy AI investment spending and maintaining profitability for established core businesses.
Alphabet lost over $500bn in value on Thursday after its AI summaries reduced traditional search ad revenue, causing shares to fall 12% to a six-month low. Despite total revenue growing 25% to $127.6bn in the quarter, the company missed analyst expectations on earnings, particularly within its advertising arm.
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Alphabet loses $500bn as AI search impacts ad revenue
Alphabet Inc. suffered a significant loss in market value, dropping by over $500 billion in a single day, following the revelation that its AI-driven search features are impacting advertising revenue. Google's new AI mode, which provides conversational answers to user queries, is reportedly eating into the money generated from search ads that previously appeared next to standard results. This shift has caused Google's stock to hit a six-month low, spooking investors concerned about the future of its core advertising business. Chief business officer Philipp Schindler acknowledged that the AI functionality was affecting the revenue streams derived from traditional search advertising. The company is now navigating the challenge of balancing its innovative AI capabilities with the financial expectations of shareholders who rely on ad revenue. This development marks a pivotal moment for Google as it transitions its search engine to integrate artificial intelligence more deeply.