Alphabet, the parent company of Google, saw its market value decline by over $500 billion on Thursday, falling to $3.46 trillion. The drop followed investor concerns regarding the impact of AI-integrated search summaries on core advertising revenue, causing the company's stock to hit a six-month low. Despite a 25% increase in total revenue to $127.6 billion, profits fell by 25% as the company reported negative free cash flow exceeding $9 billion due to heavy AI investment.
Amazon also faced investor scrutiny as its shares fell 6% following reports of a $42 billion negative cash flow, a six-fold increase over three months. CEO Andy Jassy defended the aggressive spending, citing long-term growth opportunities in custom computer chips and the Bedrock AI platform. While Amazon and Alphabet grapple with the costs of the AI race, Microsoft saw a more modest share decline of less than 1% after reporting lower AI-related expenditures and plans for workforce reductions.
Industry analysts suggest that Wall Street is increasingly skeptical about the timeline for AI profitability. While Microsoft’s cloud business and Copilot tool continue to show growth, the broader technology sector faces mounting pressure to balance massive capital outlays with the stability of established business models. Forrester analyst Tracy Woo noted that the current market volatility highlights the ongoing challenge of funding AI development without compromising core financial performance.