Oct. 29, 2026, 11:06 AM EDT / Updated Oct. 29, 2026, 1:26 PM EDT
Shares of Google parent company Alphabet sank Thursday by more than 12%, in its worst one-day performance ever, wiping out more than $500 billion in market value.
Alphabet is America’s fourth-largest company, worth a total of $3.42 trillion, as of midday. Still, the amount of value it shed Thursday ranks as the second-worst wipeout in market history, only behind Nvidia’s $589 billion drop in 2025.
The sharp drop in its stock price Thursday was the latest sign of broader anxiety across Wall Street over how long it will take big artificial intelligence companies to see consistent returns on investments worth hundreds of billions of dollars.
On Wednesday, Alphabetreported its latest quarterly financial results, revealing that revenues fell short of Wall Street’s expectations.
It also reported lackluster advertising sales.
The “magnitude” of the slowdown in Google’s search business was “steeper than expected,” JPMorgan Chase analysts wrote in a Thursday morning note.
A senior Alphabet executive told investors Wednesday that part of the reason ad revenues from search were underperforming was because of Google’s own “AI Mode” search feature, which was resulting in fewer ads.
The company is working on addressing this, senior vice president Philipp Schindler said on the investor call, adding that “ad experiments” in the feature have “shown promising results.”
Company executives tried to soften the blow for investors by touting more than 1 billion users of its Gemini AI app.
But all that AI is coming at a massive cost to Alphabet, which disclosed that it has committed to more than $1 trillion worth of multiyear spending agreements to fund the infrastructure, energy and leases required to run AI systems.
The company said during its July earnings report that it planned to spend more than $200 billion this year, which is double what it spent in 2025. The company in June also raised almost $80 billion in capital, also to spend on the ever-expanding AI build-out.
Alphabet’s disappointing results also came against the backdrop of better results from its peer Microsoft, whose shares initially rose in after-hours trading Wednesday and overnight before reversing course to fall about 1.5% by 1:20 p.m. ET Thursday.
The big drop in Alphabet shares dragged down the Nasdaq Composite index, which was down 1.5% by the afternoon. The S&P 500 fell slightly less, by about 0.4%.
Shares of chip companies that supply equipment for AI data centers followed Alphabet shares lower, with the Philadelphia semiconductor index dropping 1.6%.
The bleeding even spread beyond the tech sector, as shares of construction equipment giant Caterpillar — a key supplier of the machines required to build data centers — plunged 9% early Thursday.
Caterpillar’s recentearnings report revealed that the company’s revenues beat Wall Street expectations but by less than many traders had hoped.
The industrial giant was the second worst performing stock on Thursday in the Dow Jones Industrial Average, behind only Alphabet. The Dow declined slightly more than 200 points.
As investors clamor for ever-higher returns from companies linked to the costly AI build-out, stock in firms that only narrowly top earnings targets, like Caterpillar, has been punished with dramatic sell-offs.
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