Google value plunges by $500bn as its own AI search hits ad sales

Google CEO Sundar Pichai has backed the company's massive spending on AI. Google-owner Alphabet lost just over $500bn (£374bn) in value on Thursday after it revealed its own artificial intelligence (AI) summaries were hitting search advertising revenue. Chief business officer Philipp Schindler said Google's "AI mode", where it answers questions conversationally, was eating into the money it makes from ads which appear next to results to traditional search questions. Yet, Schindler said he felt "very good about our trajectory" with an AI-focused version of the search engine. Google's role in answering the world's questions has been challenged , with millions of people using programs such as ChatGPT and Claude instead. Kim Scott, who formerly led Google's advertising business, told the BBC's Today programme that the company would "rather eat its own lunch than allow someone else to eat their lunch" . She said that Google was founded on the idea of making long-term bets on technology – even if they hurt the firm in the short term. "I think they're making a long-term bet on AI," she said. In its results published on Wednesday, Alphabet revealed that total revenue grew 25% in the three months to the end of September, compared to the same period last year, hitting $127.6bn. However, the firm did not make as much money as analysts had predicted, particularly in its advertising arm, which spooked many investors. Shares in the company plummeted over 12% to a six-month low following the release of the results. , the company's total stock market value had fallen to $3.46 trillion from $3.97 trillion the day before. Tracy Woo, a principal analyst at Forrester, said Alphabet's disappointing Search business results "highlights the challenge of funding massive AI investments while maintaining the strength of established businesses." Microsoft and Amazon also issued updates this week, and joined Google in plans to keep spending huge sums of cash in the ongoing AI race. But investors appeared dismayed at the impacts these plans are having on the ability of each to keep growing their core lines of business. Amazon's stock took a hit on Thursday , with its shares falling 6% in after-hours trading. Alongside quarterly sales growth of 11%, hitting $201bn, the company shared a staggering cash flow figure of negative $42bn. That number shows that Amazon is not only spending more money than it makes, but that spending has increased six-fold over the span of three months. Chief executive Andy Jassy claimed the business was spending in part because it had the chance at, not one, but two businesses that could end up bringing in $1 trillion for Amazon the future.