Google value plunges by $500bn as its own AI search hits ad sales
Google spooked investors so badly that its stock hit a six-month low, after it revealed its AI own search summaries were affecting ad revenue.
Key points
- Alphabet lost just over $500bn in value after AI search summaries were said to hit ad revenue.
- Alphabet's total revenue grew 25% to $127.6bn but missed analyst predictions, especially in advertising.
- Amazon shares fell 6% in after-hours trading as it reported negative cash flow of $42bn.
Alphabet, the owner of Google, lost just over $500bn (£374bn) in stock market value on Thursday after it said its own AI summaries were affecting search advertising revenue. Chief business officer Philipp Schindler said Google's "AI mode", which answers questions conversationally, was reducing money made from ads shown next to traditional search results.
The drop followed Alphabet's results published on Wednesday. Total revenue rose 25% in the three months to the end of September compared with the same period last year, reaching $127.6bn, but the company made less than analysts had predicted, particularly in advertising. Shares fell more than 12% to a six-month low, and the company's total market value dropped to $3.46 trillion from $3.97 trillion the day before.
Former advertising chief responds
Kim Scott, who formerly led Google's advertising business, told the BBC's Today programme that the company would "rather eat its own lunch than allow someone else to eat their lunch" by letting its AI summaries affect search revenue. She said Google was founded on making long-term bets on technology, even if they hurt the firm in the short term, and that it was making such a bet on AI.
I think they're making a long-term bet on AI
— Kim Scott
Amazon and Microsoft results
Amazon shares fell 6% in after-hours trading on Thursday. Quarterly sales grew 11% to $201bn, but the company reported negative cash flow of $42bn, a six-fold increase in spending over three months. Chief executive Andy Jassy said Amazon could fund the plan and that it would change the size, revenue and free cash flow of the business.
Microsoft shares fell by less than 1% on Thursday. Revenue grew 19% from a year earlier to $92.3bn, and its cloud business grew 30% to $63bn. The company spent around $5bn less on AI investments and has announced plans to cut thousands of workers.
