Google parent company Alphabet suffered a massive drop in market value on Thursday, tumbling after its final business update of the year alarmed investors and sent its stock to a six-month low.
The sell-off followed admissions that Alphabet's new artificial intelligence summaries on search are impacting advertising revenue. While total quarterly revenue rose 25% year-on-year to $127.6bn, corporate profits declined by 25%. Furthermore, Alphabet reported a negative cash flow figure of negative $9bn, meaning the company is spending significantly more cash on operations and AI investments than it takes in.
The tech giant's predicament highlights a broader industry trend. Tech leaders including Microsoft and Amazon have signaled plans to keep spending astronomical sums of cash in the ongoing AI race, raising concerns among Wall Street analysts regarding their ability to keep growing their core lines of business. Amazon shares also dropped following updates driven by a staggering cash flow figure of negative $42bn as CEO Andy Jassey defended long-term investments in future trillion-dollar business opportunities.
