Potential Losses Exceeding $693 Billion Weigh on Nasdaq as Alphabet Falls
Key Facts
Nasdaq fell more than 1% in trading on October 29, with Alphabet shares down 13% at the time of Reuters’ report, in a move that reflected investor concerns about the cost of expanding in AI and the ability to generate cash. Reuters said Alphabet, Google’s parent company, was on track to lose more than $500 billion in market value if the decline continued. The report estimated that the Nasdaq-100 was at risk of shedding more than $693 billion in value in that scenario. Alphabet shares were heading for their biggest one-day drop ever. The moves came after the company’s results refocused attention on the gap between growth in some of its businesses and spending and cash-flow pressures.
Alphabet’s third-quarter results showed revenue rose 25% year over year to $127.58 billion, but fell short of the average analyst estimate of $127.97 billion, according to the Associated Press. Within the company, Google Cloud revenue surged 103% to $30.7 billion, and the CEO said infrastructure and AI solutions were key drivers of the unit’s growth. Google Search and other advertising revenue rose 12% to $63.3 billion, while YouTube advertising revenue increased 9% to $11.2 billion. The agency said growth in Search and YouTube advertising came in below some analysts’ expectations. The result was rapid expansion in cloud alongside slower-than-some-investors-expected growth in core advertising businesses.
Cash flow emerged as another focus of concern: Alphabet recorded negative free cash flow of $9.07 billion in the third quarter, while analysts had expected the company to come close to break-even, according to Reuters. In after-hours trading on October 28, Microsoft shares rose more than 3%, while Alphabet fell about 10%, Reuters reported. The agency said investors were distinguishing between companies able to fund their AI ambitions with operating cash and those whose expansion was draining cash. It also said the market rewarded Microsoft and Oracle for demonstrating their ability to finance investments, while Alphabet came under pressure because of cash burn and slower growth in Google Search. The divergence reflects a market reassessment of companies’ ability to turn AI demand into resources to finance expansion.
The reassessment pressure spread to other sectors, even as some companies continued to report strong operating results. Fortinet said quarterly revenue increased 20% to $2.08 billion, product revenue rose 37% to $765 million, and billings increased 29% to $2.34 billion. The company raised its 2026 revenue growth guidance to 20%. The figures available here, however, do not establish a specific percentage decline in its shares, so the confirmed news in its results remains the growth in revenue, products and billings, and the higher guidance. Fortinet’s performance highlights that business growth did not prevent investors from focusing on technology stock valuations and broader financing concerns.
The October 29 decline followed a rising session for Nasdaq the previous day: the index ended the October 28 session up 0.3% at 26,549.85 points and had climbed 2.3% for the week through that day, according to the Associated Press. At the October 29 open, the Nasdaq Composite fell 1.31% to 26,201.823 points, the S&P 500 declined 0.57% to 7,699.61 points, and the Dow Jones fell 0.74% to 52,086.13 points, according to Reuters data carried by KELO-AM. Alphabet shares were down 12.3% at 12:32 p.m. Eastern time and were heading for their worst day since beginning trading more than 20 years ago, according to the Associated Press. This reading differs from the 13% figure Reuters reported in its update, as each reflects a different time. On October 28, the Federal Reserve kept its target rate range at 3.75% to 4%, in a decision approved by a 10-to-2 vote, with the two dissenting members preferring a quarter-percentage-point increase.
The Fed said in its statement that economic activity was expanding at a solid pace and inflation remained elevated, pointing to the strength of capital investment and saying additional information would help the committee determine the appropriate policy stance to return inflation to its 2% target. On future guidance, Alphabet’s chief financial officer said the company expects a significant increase in capital spending during 2027. She added that the company would provide more details on spending during its fourth-quarter results call. This guidance puts spending plans at the center of investors’ focus on upcoming results, alongside Google Cloud’s growth and the pressure recorded on free cash flow. The fourth-quarter call will be the forum where the company said it would provide further details on those plans.