Alphabet Is Having a Very Rough Day on Wall Street

A potentially historic drop for Alphabet's stock is dragging the US market lower Thursday after the company behind Google and YouTube reported weaker growth for the summer than analysts expected. Alphabet is one of the most influential stocks on Wall Street because it's one of the largest, and its 12% drop is on track to be its worst since it began trading more than 20 years ago, the AP reports. It was under heavy pressure to at least meet analysts' expectations for growth amid concerns about how much it's spending to invest in AI.

• Alphabet said late Wednesday that it burned through more cash during the latest quarter, according to a measure called free cash flow, after its purchases of property and equipment topped $51 billion.
• Such worries are weighing on the entire AI industry following a frenzy to build data centers and fill them with AI chips. Not only are concerns high that the AI revolution may not produce as much profit and productivity as hoped, future spending is also under pressure because of how expensive it's become to borrow money.
• Alphabet's search business, its biggest source of revenue, is under pressure from the rise of chatbots like ChatGPT and Claude, with Google's Gemini falling behind, CNBC reports. "The problem for Google is it faces an innovator's dilemma and doesn't know whether to protect its core business or look to join the disruption," says Ben Barringer, global head of technology research at Quilter Cheviot. "As such, Google has lost its edge with Gemini and is behind peers on agentic AI."