Alphabet Loses $500 Billion in Value After Shares Fall 12.6%
Key Facts
Alphabet shares fell 12.6% on October 29, their worst daily performance since they began trading more than 20 years ago, wiping about $500 billion off the company’s market value. Reuters said investors reassessed the impact of accelerating AI spending on cash flow after disappointing search advertising results and increased cash burn. The decline came as Alphabet posted strong revenue growth, highlighting the contrast between its expanding business and concerns about the cost of financing new infrastructure. The AP reported that the company’s purchases of property and equipment exceeded $51 billion in the quarter ended in September, after the company said it had used up more cash. According to Reuters, Alphabet accounted for most of the potential losses exceeding $500 billion in the Nasdaq-100 during the session.
Alphabet’s consolidated revenue rose 25% to $127.6 billion in the third quarter, according to the company’s filing with the U.S. Securities and Exchange Commission. The company said this marked its thirteenth consecutive quarter of double-digit revenue growth, with strong performance across its businesses. But strong revenue did not prevent pressure on the stock, as concerns centered on the cash investment required to keep pace with demand for AI services. Google Cloud revenue rose to $30.709 billion in the third quarter, compared with $15.157 billion in the same period of 2025. The figures put cloud growth on one side and investor concerns about the cost of expanding computing capacity on the other.
The decline spread to the U.S. market, with the Nasdaq Composite falling 1.37% to 26,184.72 and the S&P 500 dropping 0.30% to 7,720.39 on October 29. The AP said most stocks listed in the broader index rose despite its lower close, while pressure was concentrated in heavyweight technology shares. Reuters reported that the Nasdaq-100 was set to lose more than $500 billion in value during the session, with Alphabet responsible for more than $464 billion of that potential amount. In trading that day, Meta shares closed at $624.52, Alphabet Class A at $283.82, and Amazon at $243.79. Share movements diverged across companies; Reuters noted that Meta shares rose during the session while Alphabet shares fell sharply.
At Amazon, the company posted a free cash flow loss of $42.4 billion for the 12 months ended September 30, according to the AP. At the same time, Amazon Web Services sales rose 39.3% to $46 billion in the quarter ended on the same date. The AP said this was the service’s fastest growth rate in about five years, placing cloud expansion alongside investment costs weighing on cash flow. Amazon expects to spend $220 billion on capital expenditures during 2026, with most of that attributed to building AI data centers. The combination of cloud growth and a cash flow loss reflects the challenge facing technology companies: turning large infrastructure spending into sustainable revenue.
Amazon gave fourth-quarter revenue guidance of $240 billion to $247 billion, equivalent to annual growth of 12% to 16%. The range was around analysts’ estimate of $244.16 billion, according to the AP. The guidance provides a near-term indication of sales growth, while the elevated capital spending plan remains a focus for investors. At Microsoft, capital spending exceeded $50 billion in the second quarter of its fiscal 2027, and the company expects it to exceed the same level in the following quarter. Microsoft said customer demand for Azure exceeds available capacity and forecast service revenue growth of 49% to 50% in constant currency in the second quarter of its fiscal 2027.
Microsoft said its capital expenditures totaled $45.2 billion in the quarter ended September 30, 2026, with about three-quarters allocated to short-lived assets, including central processing units and graphics processing units. The company said these assets support AI applications, indicating that the spending includes equipment requiring faster updates than long-lived assets. This comes alongside its expectation that capital spending will exceed $50 billion in the following quarter and continued demand for Azure exceeding available capacity. Against the backdrop of market moves, the Federal Reserve kept its target interest rate in a range of 3.75% to 4% in its decision issued on October 28. The decision passed by a 10-to-2 vote, with the central bank acknowledging that inflation remains elevated.
Among the developments markets are watching is a potential initial public offering by Anthropic, Reuters reported, which would test investor sentiment toward AI companies. The agency quoted an investment manager as saying: "The next major milestone will be Anthropic’s IPO, to see how it goes. If the listing is weak, I think that could point to some weakness in the period ahead." That anticipation links companies’ ability to attract new funding with investors’ willingness to continue backing the sector. Spending concerns had already emerged in Alphabet’s sharp decline, despite higher revenue and growth in its cloud business. Amazon’s upcoming results will also remain in focus given its fourth-quarter sales forecast and capital investments during 2026.