Google's parent company loses $500 billion in value in one day

Alphabet, the parent company of Google, lost more than $500 billion in market value in a single day after its latest earnings report. Its shares fell more than 12%, to their lowest level in six months. Its total value dropped to $3.46 trillion from $3.97 trillion the day before.

What changed

The worry centers on AI Mode, a Google search feature that gives direct, conversational answers instead of a list of links. If people read the answer and stop there, fewer of them click on sponsored links, the paid ads that fund much of Google's business. Google Chief Business Officer Philipp Schindler acknowledged that AI Mode is affecting the traditional search advertising model.

The numbers added to the concern. Overall revenue grew, but advertising missed Wall Street expectations. Ad sales grew at their slowest pace in five quarters, and net profit fell 25%. Alphabet is also spending heavily on data centers and advanced chips for AI, which has put pressure on its free cash flow, the cash left after a company pays its costs and investments.

What is not known yet

The material does not say how much AI Mode is reducing ad clicks, or when Alphabet expects its AI spending to pay off. Former Google ad executive Kim Scott described the company's approach as "a long-term bet on AI." For businesses that depend on Google ads or search traffic, the open question is how customers will find them if AI answers replace clicks.