Alphabet shares plunge 12%+, erasing $500 bn market cap after negative cash flow and AI spending; Nasdaq down 1.4%
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| Source: Techmeme | Original article
Alphabet shares plunged over 12%, erasing about $500 billion in market value as the company reported negative cash flow tied to AI spending, dragging the Nasdaq down more than 1.4%.
Alphabet’s shares tumbled more than 12 % on Tuesday, erasing roughly $500 billion from the company’s market value and pulling the Nasdaq down over 1.4 %. The plunge followed the tech giant’s earnings release, which revealed a negative cash‑flow position tied to its aggressive push into artificial intelligence. Management admitted that operating in “AI mode” has begun to cannibalise traditional search revenue, leaving both sales and profit figures below analysts’ forecasts.
The slide underscores the growing tension between the promise of generative‑AI products and the cost of building the underlying infrastructure. Alphabet has been pouring billions into custom chips, data‑center expansion and talent to keep pace with rivals such as Microsoft, which recently logged $10 billion in revenue from its OpenAI partnership. The Financial Times report suggests that the scale of Alphabet’s AI spend is now large enough to dent its balance sheet, a development that could reverberate across the broader tech sector, already feeling pressure from soaring flash‑memory prices and heightened competition for AI talent.
Investors will be watching how quickly Alphabet can translate its AI research into profitable services. Key indicators include the next quarterly earnings call, any revisions to its AI‑related capital‑expenditure plans, and the performance of its core ad‑driven search business. Analysts will also gauge whether the company can stabilise cash flow without throttling the rollout of new AI features that have become a differentiator in the market. The broader market reaction—already evident in the Nasdaq dip—will likely hinge on whether Alphabet can balance innovation with fiscal discipline in the months ahead.
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