500 billion dollars gone: Google's AI mode backfires

500 billion dollars gone in one session: Alphabet has just had the worst stock market day in its history. And the culprit was born in his own laboratories.

Alphabet shares fell by almost 13% on Thursday, erasing around $500 billion in capitalization. Unheard of for Google's parent company since its IPO in 2004, the previous record, 11.63%, dating from March 2020. The day before, the group announced a quarterly turnover up 25%, to $127.6 billion, driven by a cloud which has doubled in one year.

The problem lies in research, which alone accounts for almost half of the group's revenues. Its revenue rose 12% in the third quarter to $63.35 billion, missing analysts' expectations for the second time in a row. The previous two quarters still showed 19%, then 17% growth.

Questioned during the presentation of the results, Philipp Schindler, Google's commercial director, first pointed out currency effects, the primary factor in the slowdown according to him. Before letting go: “the strong growth in AI mode requests had an impact, due to the lower monetization that we observed there”. In other words, Internet users have never questioned Google so much, the growth of queries has even reached its highest rate in five years, but each answer generated by the AI ​​brings in less than ten blue links.

At the same time, the group is sinking record sums into its data centers, between $195 billion and $205 billion expected for the year, and its free cash flow was negative $9.07 billion over the quarter. Spend more to earn less with each request: Wall Street has decided.

Google is not the first victim of its own AI-powered responses. Also on Thursday, Reddit announced the scheduled end of its account-free consultation: tests of access reserved for connected members will begin this quarter, outside the United States. The network says it lost more than 1 million referrals per week from search engines in October. Its daily attendance could decline by around 10% by the end of the year, he warns. His boss Steve Huffman accuses: “Google has really changed its relationship with the rest of the Internet.”

No more back and forth: Gemini finally allows you to modify your documents directly in the application

Good news: Xreal cuts the price of its new connected glasses as soon as they are released

Discord will let Google search some of its users' messages

Machine-translated from French