Google parent company has $500bn wiped off market value over AI fears

Shares in Google's parent Alphabet are on course for one of their sharpest one-day falls on record.

At one stage, a 13% decline in one day meant its market value had plunged by $500bn (£376bn).

Market analysts said the share price shift was a sharp reminder for tech companies not to miss earnings forecasts at a time when investor nerves over lofty valuations, especially in the artificial intelligence (AI) space, were being tested.

Money latest: New tax allowance for pensioners explained

The company's latest quarterly earnings report showed Alphabet burning through cash in the AI race and Google's search division apparently suffering at the hands of AI competition.

Search revenue growth missed market forecasts by almost three percentage points, coming in at 12%.

What also spooked shareholders was a negative free cash flow of $9.07bn for the third quarter - more than triple the sum expected.

Negative free cash flow occurs when a company's cash outflows for operating activities and capital expenditure exceed the total cash it brings in from regular business operations.

A record $205bn investment bill is expected at Alphabet this year alone, as chatbots and agents change how people are searching for information in a market that Google has dominated.

Chief executive Sundar Pichai said ad queries were growing ‌at their fastest pace in five years but it was not enough to stop the bleeding.

Shares were trading down 12% in early afternoon dealing on Wall Street - recovering some lost ground but still hovering around the worst one-day performance in the company's listed history.

Microsoft fell 1.5% - matching a plunge in the wider Nasdaq tech-focused index - following media reports the company is planning to raise at least $25bn through a bond sale despite its earnings of the previous evening beating forecasts.

Tech giants' valuations have bucked the trend of big growth this year, with the likes of Meta and Alphabet actually recording a dip in their market capitalisations in the year to date.

The funding of the AI investment boom has come under closer scrutiny in recent times as borrowing costs are on the rise globally amid high demand among both companies and national governments.

The rush for investment has prompted the likes of SpaceX to go public to raise cash, with its founder Elon Musk recently warning that hundreds of so-called Neocloud firms risked a "guppy-level death" because of a growing funding squeeze.

Anthropic's confirmation of its intention for a stock market flotation is another example of the need to raise cash differently.

The company behind the popular Claude chatbot is reportedly seeking to raise $100bn from the initial public offering next month.

It is seen as a crucial barometer of investor appetite as nerves over debt-fuelled ambition are coupled with risk relating to AI's safety and future capabilities.

More from Sky News:
Poundland close to collapse
Rules on U-16s social media ban

Kathleen Brooks, research director at the investment firm XTB, said on Thursday: "The big problem for investors when it comes to AI is the cost of the payoff.

"Hundreds of billions of dollars are being spent by the hyperscalers to boost their AI capabilities, so investors want to know that it is worth it.

"Google has now reported two quarters of negative cash flow, and this is unacceptable for investors."

She added: "The AI trade is not moving as a unified block. Investors are willing to reward good earnings results, for example, Microsoft is trading up 3.5% on Thursday morning, after it reported solid results that have impressed the market. Amazon will report results tonight, before Apple next week, which will test sentiment further."

(c) Sky News 2026: Google parent company has $500bn wiped off market value over AI fears