Alphabet, the parent company of Google, shed more than $500 billion in market value on Thursday after its shares dropped over 12 percent in a single session, according to dbcnews.tv. The sell-off followed the company's third-quarter earnings report, published Wednesday, which showed advertising income landing below what investors had expected.
The concern centres on Google's AI Mode, a search feature that answers users' questions in a conversational format. Philipp Schindler, Alphabet's chief business officer, said the technology is affecting advertising revenue from conventional search, dbcnews.tv reported. Because users receive direct conversational answers, there are fewer opportunities for the ads that normally appear alongside standard search results.
Why it matters
The reaction shows how closely investors are watching whether artificial intelligence can be folded into Google's core business without eroding it. Search advertising has long been the company's financial engine, and AI Mode sits directly on top of that engine. If the new format draws users away from the pages where ads are sold, the company faces the challenge of replacing that income even as it spends heavily to build the AI systems behind it.
The scale of the one-day loss underlines how much of Alphabet's valuation rests on confidence in its advertising machine. According to dbcnews.tv, the company's market capitalisation stood at $3.97 trillion on Wednesday and fell to $3.46 trillion on Thursday.
Revenue grew, but advertising disappointed
The quarterly report was not uniformly weak. Alphabet said revenue for the three months to the end of September rose 25 percent year on year to $127.6 billion, dbcnews.tv reported. The shortfall was concentrated in advertising, where results came in under expectations and left investors dissatisfied.
That gap between overall growth and advertising performance is what drove the share price reaction. Schindler's comments tied the advertising softness directly to AI Mode, giving investors a concrete explanation for the miss rather than a vague warning about future disruption.
Analysts quoted in the report said technology companies now face a dual test: sustaining the earnings of their established businesses while committing large sums to AI development. Alphabet is not alone in confronting that tension.
Pressure across the AI sector
Amazon and Microsoft have also increased their spending on AI, and both saw their shares decline, according to dbcnews.tv. Amazon's stock fell 6 percent, while Microsoft's slipped by less than 1 percent. The report also noted sharp drops in Intel and Reddit shares on the final trading day of October.
The common thread, according to analysts cited in the coverage, is growing investor anxiety over how much financial return AI investment will ultimately deliver. Companies are being asked to show results from AI spending at the same time as they defend the revenue streams that fund it.
For Alphabet, the question is particularly pointed because its AI products are being deployed inside the search business itself, not in a separate venture. Every change to how search results are presented has a direct bearing on where ads appear and how they are priced.
What to watch
Attention now turns to whether Alphabet can stabilise advertising income as AI Mode expands. The company has said it is rolling out advertising in AI Mode in additional countries, a signal that it intends to monetise the format rather than treat it purely as a user experience upgrade. How quickly those ads scale, and whether they offset the decline in conventional search advertising, will be the measure investors watch in the coming quarters.
