Google value plunges by $500bn as AI fears rattle Wall Street

Google parent Alphabet lost just over $500bn (£374bn) in value on Thursday after it rattled Wall Street with its last update of the year on its business operations. Google spooked investors so badly that its stock hit a six-month low, after it revealed its artificial intelligence (AI) summaries on search were affecting ad revenue. Microsoft and Amazon also updated investors this week, and joined Google in plans to keep spending astronomical sums of cash in an ongoing AI race. But investors appeared dismayed at the impacts these plans are having on the ability of each to keep growing their core lines of business. Google AI is eating its core business – search At first glance, the quarterly results of Alphabet, the parent company of Google, were not at all bad. Total revenue grew 25% compared to last year, hitting $127. 6bn.

It was buoyed by the ongoing success of Google Cloud, where revenue grew by 103% to almost $31bn. However, profits at the company fell by a considerable 25% during the quarter. And for the second time in its history as a public company, it showed negative free cash flow, this time in excess of $9bn. That’s almost twice the loss of cash Alphabet showed just three months ago. Cash flow represents the money a company retains after paying for operations and investments, meaning Alphabet is now spending more money than it is bringing in. That new level of spending is almost entirely dedicated to Google’s AI investments. By the end of Thursday, the company’s total stock market value had fallen to $3. 46 trillion from $3. 97 trillion the day before. Google’s omnipresent search engine now defaults to AI summaries of a person’s query, and that hit the number of advertisements it was able to sell during the quarter. The sale of ads that appear alongside Google…