Shares of Google’s parent company tumbled more than 12% on Thursday, their worst day on record — a historic single-day decline bigger than any day during the Covid-19 pandemic or 2008 financial crisis.
The drop erased roughly half a trillion in Alphabet’s ( GOOGL ) market value, the second-largest single-day wipeout in history, after Nvidia’s nearly-$600 billion slide in early 2025 .
Investors are increasingly scrutinizing Big Tech’s AI spending spree and how the technology is affecting their own businesses — and Alphabet is their latest target.
The company’s shares dropped sharply as investors fretted over slowing growth in Google’s search advertising business occurring alongside a continued ramp-up in spending on AI.
The world’s largest technology companies are spending hundreds of billions of dollars to build data centers, in a race to try and be among the winners of the artificial intelligence boom.
Wall Street is getting more cautious, attempting to sort out which companies are spending rationally, how those outlays are impacting other parts of their business, and who will actually benefit from AI’s transformative impact on society.
Alphabet reported quarterly sales figures on Wednesday that missed analysts’ expectations. Investors were dismayed by the miss in sales figures, which reignited longstanding concerns about whether the company’s cash cow — Google’s search advertising business — will be able to withstand the pressure of consumers increasingly using Google’s own (and competitors’) AI chat bots in the place of traditional search.
The fear is that this displacement might happen “faster than Google can react to it and pivot their business,” said Jed Ellerbroek, portfolio manager at Argent Capital Management.
The company also disclosed a second consecutive quarter of negative free cash flow, another metric causing concern among investors. Since going public in 2004, Google — which became Alphabet in 2015 — hadn’t posted a single quarter of negative free cash flow until this year. Strong free cash flow is one sign of a healthy company that can pay dividends, conduct share buybacks and reinvest in its business.
Alphabet recorded $51.4 billion in capital expenditures in the third quarter alone, compared to $91.4 billion for the entire year in 2025. As the company ramps up its spending on AI, including data center construction, it’s leaving less cash for the kind of immediate gratification investors love, like share buybacks and dividends.
In stark contrast to Alphabet’s negative free cash flow, Microsoft reported this week that it had $18.6 billion in free cash flow in the third quarter, even as it continues to spend billions on its AI buildout. Microsoft’s shares ended the day flat on Thursday while Alphabet shares dropped more than 12%.
“We are now getting to see who is spending rationally on AI and who is not,” said Richard Reyle, chief investment officer at Questar Capital Partners.
It might seem odd that shares of one of Big Tech’s biggest companies aren’t soaring after Anthropic filed its highly anticipated initial public offering prospectus just days earlier. Anthropic is committing to spending a lot of money to rent compute power from tech companies like Alphabet.
But that future promise isn’t guaranteed, especially if the data center buildout doesn’t go to plan or if the AI isn’t as profitable as expected. Alphabet is asking investors to believe in its vision for AI and the data center buildout, while also trying to monetize AI and show it can generate strong returns from the technology.
Growth in Big Tech companies’ cloud computing divisions is a sign that demand for AI continues to be robust. But the market is on edge about anything that could go wrong for the AI boom.
Big Tech companies like Alphabet are turning to debt and financial markets to raise more capital to help fuel their ambitions. While companies say they are trying to keep up with demand, the competition for funds from investors is rising.
“Everybody is trying to get through the door at the same time, and it gives people pause,” said Ted Mortonson, an investment strategist at Baird who focuses on the tech sector.
Wall Street is becoming more disconcerting about the data center buildout, and companies that are burning through free cash flow are getting punished.
