Google owner Alphabet loses $500 billion in a day as its own AI Mode eats into search ads

Alphabet, the owner of Google, lost just over $500 billion of market value on Thursday 29 October, about Rs 138 trillion, after the company said its own AI answers were cutting into search advertising, the BBC reported. Its shares fell more than 12% to a six-month low, and its value dropped from $3.97 trillion to $3.46 trillion in one session.

Alphabet results: the numbers

Revenue still grew strongly, but advertising came in below analysts' forecasts, and that is what spooked investors.

Why AI Mode is hitting Google's ads

Chief business officer Philipp Schindler said Google's AI Mode, where search answers questions conversationally, is eating into the money Google makes from ads placed next to traditional results. When the answer arrives as a written summary, fewer people click through the list of links and the ads around it. Schindler still said he felt "very good about our trajectory" with the AI version of search.

Google is under pressure from both sides: millions of people now ask chatbots such as ChatGPT and Claude instead of searching, and Google's own answer to that threat is the product now denting its biggest business. Kim Scott, who once led Google's advertising business, told BBC Radio 4's Today programme that Google would "rather eat its own lunch than allow someone else to eat their lunch", calling it "a long-term bet on AI".

Amazon and Microsoft spooked markets too

The same week, Amazon and Microsoft said they would keep spending huge sums on AI. Amazon reported quarterly sales up 11% to $201 billion but a negative cash flow figure of $42 billion, and its shares fell 6% in after-hours trading. Chief executive Andy Jassy argued the spending could build two businesses worth $1 trillion each, pointing to Amazon's own chips and its Bedrock AI platform.

What it means in Pakistan

Google brought ads inside its AI search answers to Pakistan this week, one of 10 new countries (our report). For Pakistani businesses that buy Google search ads, that is the practical change to watch: if fewer people click the classic results, the cost and placement of ads will shift towards the AI answer. For investors with US tech shares through a broker, the fall also hit the wider Nasdaq on Thursday. Our currency converter does the dollar to rupee arithmetic on any of these figures, and the dollar rate page shows today's interbank rate.