Alphabet Shares Plunge 12.6% as Investor Concerns Grow Over AI Costs
Key Facts
Alphabet Class A shares fell 12.6% in the October 29, 2026 session, their biggest one-day decline since they began trading more than 20 years ago, as the Nasdaq dropped 1.4% and the S&P 500 fell 0.3%. The stock came under pressure despite the company reporting strong quarterly revenue growth, as investors focused on concerns over high cash spending on artificial intelligence. The company’s results showed search revenue rose, while search queries posted their highest annual growth rate in five years. The session’s contrast centered on strong operating performance and market questions about the scale of spending needed to continue expanding in artificial intelligence. The Associated Press said the stock recorded its worst day in more than two decades.
Alphabet said consolidated revenue rose 25% to $127.6 billion in the third quarter compared with the same period a year earlier. Google Services revenue increased 11% to $96.3 billion, while annual growth in search queries was the highest in five years. These figures support a picture of strong demand for the company’s core services, but they did not prevent the stock’s sharp decline in the session. Market reports linked the drop to concerns over high cash spending on artificial intelligence, not to a confirmed decline in search activity. This divergence puts the company’s results at the center of investor debate over whether large investments will be matched by sufficient operating returns.
Elsewhere in the market, Eli Lilly shares rose 6.6% in the October 29 session after the company reported results. In the U.S. economy, real gross domestic product grew at an annual rate of 3.4% in the third quarter, compared with growth of 2.2% in the second quarter. Real final sales to private domestic purchasers also rose 4.9%, after 4.6% in the previous quarter. An analyst quoted by Reuters said "the economy’s fundamentals remain strong," as stock indexes fell with AI-related concerns outweighing some encouraging data. The analyst attributed the market move to results from Alphabet and ServiceNow, while saying the GDP reading pointed to resilient economic fundamentals.
Data from the U.S. Bureau of Economic Analysis showed that the headline personal consumption expenditures price index rose 0.5% in September from the previous month and 3.6% from September 2025. The core index, which excludes food and energy, increased 0.3% monthly and 3.1% annually. This distinction separates the headline and core readings: 0.5% and 3.6% refer to the headline index, while 0.3% and 3.1% reflect the core index. The data come as investors track inflation and the path of U.S. monetary policy, but they did not prevent stocks from falling in the session. The bureau set November 25, 2026, as the release date for its October personal income and outlays report.
In Europe, the European Central Bank left its key interest rates unchanged in its decision issued on October 29. The deposit facility rate remained at 2.50%, the main refinancing operations rate at 2.65%, and the marginal lending facility rate at 2.90%. The bank said higher energy prices raise inflation risks while also weighing on growth prospects. It reaffirmed that it would follow a data-dependent, meeting-by-meeting approach, without committing in advance to a particular rate path. This means the decision kept rates at their current levels, while energy risks remained part of the bank’s assessment of the economy.
According to sources cited by Reuters, European Central Bank officials expected a rate increase at the December 17 meeting, which could lift the deposit rate to 2.75%, followed by a pause. The report said those expectations take into account the impact of higher bond yields, which could reduce cumulative growth by 100 basis points and inflation by 90 basis points in 2027–2028 compared with September projections. These expectations are attributed to unnamed sources and are not an official decision or guidance from the European Central Bank. In the United States, the upcoming November 25 release date offers a chance to follow the second estimate of third-quarter GDP and corporate profits, alongside the October personal income and outlays report. Those releases are expected to give investors an updated reading on growth and inflation after September’s data and the advance GDP estimate.