Google's parent company Alphabet had its worst day on the stock market since its 2004 IPO on Thursday, October 29. Shares fell more than 12 percent after the third-quarter results. According to sources, the market value wiped out was between $482 and $496 billion, that is, about $500 billion.
What happened?
The interesting part is that the numbers weren't bad. Alphabet reported revenue of $127.6 billion for the quarter, growth of 25 percent. Google Cloud revenue rose 103 percent, from $15.2 billion to $30.7 billion. The Gemini app also passed 1 billion users.
Two things scared investors. The first was spending: the company made a record $51.4 billion in investment in a single quarter, up from $24 billion a year earlier. As a result, free cash flow fell to about negative $9 billion and stayed negative for a second quarter in a row. The second was search: Google Search revenue grew 12 percent to $63.4 billion, but that fell short of Wall Street's expectation of about $65 billion.
Why does it matter?
This drop is the second-largest single-day market value loss in US history. The record still belongs to Nvidia's loss of about $593 billion in January 2025. The real message is this: the market is now questioning when the huge investments in AI will pay off. According to Yahoo Finance, an analyst at Pivotal Research said investors who were expecting a decline would read this as the first quarter in which AI began to do serious damage to the search business. Whether chatbots will replace the search ads that have been Google's cash machine for years will be the main question of the coming quarters.
A link from history
Google's journey began in 1996 at Stanford with two students who lined up ten 4 GB disks in a case made of toy bricks. We told the story of that 40 GB box in our post Google's first disk enclosure was made of LEGO. Today the same company spends more than $51 billion in a single quarter on hardware and data centers.