Google’s $500bn bloodbath reflects the danger it faces from AI

Alphabet lost $500bn of market value, 12% of the total, in one session on 29 October after quarterly results. Reported facts: Google’s search and other ad revenue grew 11% year on year in July-September, the slowest in five quarters, and a strong cloud performance did little to calm investors. What rattled them was Google’s admission that growing use of AI Mode in search, which gives chatbot-like answers, brings “lower monetisation” than classic search. Meta’s Q3 ad revenue grew 26%; excluding Google’s payments to Apple and others, the two firms’ ad revenue was similar in the quarter, and eMarketer forecast earlier this year that Meta would overtake Google in worldwide ad sales by end-2026. Madison & Wall’s Luke Stillman says Meta uses AI more aggressively in recommendations across Facebook, Instagram and WhatsApp, with tools like Advantage+ a bigger share of its business than Google’s Performance Max; Google’s varied formats (search, YouTube) may also make AI harder to apply. Amazon’s ad growth slowed to 12% from 26% and its shares fell after hours. The Economist’s reading is that the long-dismissed fear that chatbots threaten search has returned, and that the ad cash cows matter more as all three spend gargantuan sums on data centres. Counterweights it reports: MoffettNathanson compares Google’s problem to Meta’s Reels, which hurt ad growth before monetisation improved, and Madison & Wall says double-digit growth is still strong, even “unsustainably high”, by historical standards.