Google loses $500bn as AI search cuts ad revenue — SkimNews
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- Alphabet lost over $500bn in market value after reporting that its AI search mode is reducing ad revenue, even as total revenue grew 25% to $127.6bn in Q3.
- Philipp Schindler, Google's chief business officer, stated that AI Mode is driving user engagement but acknowledged it is displacing traditional search ad clicks.
- Kim Scott, former head of Google's advertising business, said the company is intentionally sacrificing short-term ad revenue to maintain control over AI-driven search.
- Tracy Woo, a Forrester analyst, noted that Alphabet’s results highlight the tension between funding massive AI investments and preserving its core advertising business.
- Amazon reported $201bn in quarterly revenue and an 11% sales increase, but its free cash flow plunged to negative $42bn due to aggressive AI spending.
- Andy Jassy, Amazon’s CEO, defended the spending, saying the company is building two potential trillion-dollar businesses in cloud services and retail, plus AI chips and Bedrock.
Why it matters: Alphabet’s $500bn value drop shows investors are penalizing even strong revenue growth when AI investments erode core profits. The market is demanding proof that AI spending will yield returns, not just disrupt existing cash cows — a pressure now facing all major tech firms.
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