Alphabet Shares Plunge 12%, Erasing Over $500 Billion in Value on AI Spending Worries

Shares of Alphabet, the parent company of Google, fell more than 12% on Thursday, marking the worst single-day performance in the company's history and wiping out more than $500 billion in market value.

As of midday, Alphabet was America's fourth-largest company, valued at a total of $3.42 trillion. Even so, the value it lost in one session ranks as the second-largest wipeout in market history. Only Nvidia's $589 billion drop in 2025 was bigger.

The sell-off reflects wider unease on Wall Street over how long it will take major artificial intelligence companies to generate steady returns on investments worth hundreds of billions of dollars.

The trigger came Wednesday, when Alphabet released quarterly results showing revenue below Wall Street's expectations, along with lackluster advertising sales. In a Thursday morning note, JPMorgan Chase analysts said the "magnitude" of the slowdown in Google's search business was "steeper than expected."

On the investor call, a senior Alphabet executive said part of the weakness in search ad revenue stemmed from Google's own "AI Mode" search feature, which was producing fewer ads. Senior vice president Philipp Schindler said the company is working to fix this and that "ad experiments" in the feature have "shown promising results."

Executives tried to reassure investors by pointing to more than 1 billion users of the Gemini AI app. But the costs of the AI push loom large. Alphabet disclosed commitments of more than $1 trillion in multiyear spending agreements covering the infrastructure, energy and leases needed to run AI systems. In its July earnings report, the company said it planned to spend more than $200 billion this year, double its 2025 outlay, and in June it raised almost $80 billion in capital for the AI build-out.

The results landed alongside stronger numbers from rival Microsoft. Its shares initially rose in after-hours trading Wednesday and overnight, then reversed to fall about 1.5% by 1:20 p.m. ET Thursday.

Alphabet's slide pulled down major indexes. The Nasdaq Composite was off 1.5% in the afternoon, while the S&P 500 fell about 0.4%. The Dow Jones Industrial Average declined slightly more than 200 points. Chip companies supplying AI data centers also dropped, with the Philadelphia semiconductor index losing 1.6%.

The losses extended beyond the tech sector. Shares of Caterpillar, a key supplier of machinery used to build data centers, plunged 9% early Thursday. The company's recent earnings beat Wall Street expectations, but by less than many traders had hoped. Caterpillar was the second-worst performer in the Dow, behind only Alphabet. As investors demand ever-higher returns from firms tied to the costly AI build-out, companies that only narrowly top earnings targets have faced dramatic sell-offs.