Alphabet's market cap sheds $500b, dragging Wall Street lower

All three major US stock indexes fell Thursday (local time) as disappointing earnings from Alphabet, Google's parent company, reignited concerns about AI investment and triggered a broad selloff in technology shares. The Dow Jones Industrial Average closed down 132.54 points, or 0.25 percent, at 52,342.56 on the New York Stock Exchange.

The S&P 500 fell 23.59 points, or 0.30 percent, to 7,720.39, while NASDAQ tumbled 365.13 points, or 1.38 percent, to 26,184.72.

Alphabet closed down 12.6 percent at $283.82, wiping out roughly $500 billion in market cap in a single session — the second-largest single-day market cap loss in Wall Street history, trailing only Nvidia's $593 billion drop in January last year.

The selloff was driven by fears that AI could be eroding Google's core business, after the company's third-quarter search and advertising revenue fell short of market expectations.

Google's third-quarter search revenue came in at about $63 billion, up 12 percent from a year earlier but below the market consensus of $65 billion. The growth rate of paid clicks on search ads also slowed, from 13 percent in the second quarter to 8 percent in the third.

A deterioration in cash flow added to investor unease. Alphabet posted a free cash flow deficit of $9.1 billion — the first time it has recorded negative free cash flow for two consecutive quarters since its listing.

The shock spread to semiconductor stocks. The Philadelphia Semiconductor Index fell 1.42 percent as concerns mounted over the financial burden of AI investment and funding conditions. Micron (-4.98 percent), SanDisk (-5.32 percent) and Nvidia (-0.80 percent) all declined.

ServiceNow (-26.95 percent) and Fortinet (-20.09 percent) also plunged after their earnings releases, adding to the pressure on technology shares.

Enterprise software firm ServiceNow posted third-quarter subscription revenue growth of 20.5 percent year-on-year and a 21 percent increase in current remaining performance obligations (cRPO), both beating market estimates. However, fourth-quarter cRPO growth guidance of 18.5 percent raised concerns that growth momentum could slow.

Cybersecurity firm Fortinet saw its share price plunge 20.09 percent after third-quarter product revenue growth slowed to 37 percent from 52 percent the previous quarter and the company cut its full-year service revenue outlook.

Seo Sang-young, a managing director at Mirae Asset Securities, said the sharp post-earnings drops at ServiceNow and Fortinet "heightened vigilance over structural changes in the software industry and private credit risks."