Biggest-ever fall in Google shares:Stock falls 13%, market cap plunges by ₹48 lakh crore amid AI spending fears

Shares of Google parent Alphabet fell 13%, marking the company’s biggest one-day decline since it went public in 2004. The sell-off wiped $500 billion, or around ₹48 lakh crore, off the company’s market value. Investors worried about heavy AI spending, sending shares lower Alphabet released its quarterly results on Wednesday night. The company’s free cash flow fell to minus $9.07 billion, while experts had expected positive cash flow of $2.7 billion. The company retained its full-year capital expenditure guidance of $195 billion to $205 billion, or around ₹18 lakh crore to ₹19 lakh crore. This means Google is spending heavily on data centres, servers and chips to stay ahead in the AI race. Its cash outflow rose so sharply compared with its inflows that its free cash flow reached minus ₹76,000 crore, even though the market had expected a profit. In other words, the company is investing heavily in AI infrastructure, but it is not yet generating enough revenue from it. Alarmed by this, investors sold the shares. Sluggish growth in search business drives decline Search advertising is Google’s biggest source of revenue. It rose 12% to $63.35 billion, or around ₹6 lakh crore, in the September quarter, but fell short of analysts’ estimates. Alphabet Chief Business Officer Philipp Schindler said the search business had been affected by lower monetisation within AI Mode. Google Search faces competition from ChatGPT The arrival of AI chatbots such as OpenAI’s ChatGPT and Anthropic’s Claude is challenging Google’s dominance. Users are now making search queries outside Google as well. 400 crore users are Google’s biggest strength Despite the challenges, market experts are not pessimistic about Google’s future. Scott Devitt, an analyst at Rosenblatt Securities, said this was not a permanent shift. He said, “Alphabet has a base of 400 crore users. Once the model for advertising and monetisation in AI is established, these same users will become AI customers, strengthening the company.” Microsoft shares flat, cash flow falls 27% Meanwhile, shares of technology giant Microsoft appeared to be trading almost flat. During the quarter, Microsoft’s capital expenditure and finance leases rose 30% to $45.2 billion. However, this was below analysts’ estimate of $50.67 billion. The company’s free cash flow fell 27% to $18.63 billion, but it did not turn negative like Alphabet’s. Market analysts say Microsoft is building its AI infrastructure more cautiously, resulting in fewer shocks for investors.