Google lost $500 billion in market value after admitting its AI search features are reducing advertising revenue.
Alphabet, the parent company of Google, recently lost over $500 billion in market value. This decline occurred after the firm revealed that its new AI search summaries hurt advertising income. These tools answer user questions directly, which reduces the need for people to click on traditional ad links.
However, Google executives remain positive about the company's future direction. Chief business officer Philipp Schindler stated that he feels good about the AI-focused search engine. He believes this long-term strategy will protect the firm from competitors in the evolving tech market.
Meanwhile, experts suggest that Google prefers to disrupt its own business rather than lose ground to others. Former advertising leader Kim Scott noted that Google often makes large bets on new technology. These investments may cause short-term pain but aim for long-term success.
Additionally, Alphabet reported total revenue growth of 25% for the recent quarter. Despite this, the company missed earnings expectations set by financial analysts. This discrepancy caused shares to drop by 12% and hit a six-month low.
Next, other tech giants also face pressure from rising AI costs. Amazon saw its stock price fall by 6% during recent after-hours trading. The company reported a negative cash flow of $42 billion due to heavy spending.
After that, Amazon CEO Andy Jassy defended these high costs. He believes the company has two major opportunities that could eventually generate $1 trillion. He pointed toward Amazon’s custom computer chips and its AI developer platform, Bedrock.
Then, Microsoft shared its own financial update with investors. Its stock performance remained relatively stable, falling by less than 1% on Thursday. The company continues to invest heavily in OpenAI while managing its own internal costs.