Alphabet stock drops nearly 13%, losing $500 billion on its worst day

Alphabet, the parent company of Google, had the worst trading day in its history on Thursday, October 29, 2026. Its shares fell by nearly 13% in New York, wiping out close to $500 billion of market value in one session, a day after the company reported its results for the July to September quarter. Investors reacted to slower-than-expected growth in search advertising, a drop in free cash flow and the company's plan to keep raising spending on artificial intelligence (AI) infrastructure into 2027.

The fall is striking because the headline numbers were large. Revenue grew by a quarter, operating income rose 30% and the cloud business more than doubled. The problem for investors was what the company is spending to get there. Capital expenditure means money spent on long-lasting assets such as buildings, chips and servers. When it rises faster than the cash a business brings in, free cash flow, the cash left after those investments, shrinks. Alphabet's free cash flow fell in the quarter, and the company signalled that 2027 spending will be higher again. Several analysts said the market is no longer willing to reward AI spending on trust alone and wants to see it turn into profit.

Search is the second worry. Google's search advertising business still produces most of Alphabet's profit, and its growth of about 12% fell short of forecasts. Investors are watching whether AI chat assistants, including Google's own, are drawing users and advertisers away from the traditional results page. A note from Bank of America, cited in market coverage, said the selling had left Google's core search business valued at about 10 times earnings, against 18.7 times for the S&P 500 index as a whole.

The day also showed how concentrated US markets have become. A handful of very large technology firms make up a big share of the main indexes, so a sharp move in one of them affects index funds and pension savings well beyond Alphabet's own shareholders. Alphabet remains one of the world's most valuable companies, worth more than $3 trillion even after the fall.

For Indian readers, the result matters in two ways. Google is one of the largest digital advertising platforms in India, and its spending plans shape demand for cloud and data-centre capacity in the country. Indian investors who now buy US shares directly through local brokers' overseas platforms also hold Alphabet in large numbers, so the fall touches their portfolios too.

Short-term: The fall dragged on other technology shares that depend on the same AI spending story and fed a wider debate about whether the biggest US companies are spending too much, too fast. Traders will watch whether Alphabet's shares recover in the coming sessions or keep sliding.

Long-term: If AI spending keeps rising without a matching rise in profit, investors may push the largest technology companies to slow their data-centre plans, which would affect chip makers, power suppliers and cloud customers worldwide. If the cloud growth continues at this pace, the spending may yet be judged worthwhile.

Who is affected: Alphabet shareholders, including index-fund savers in the US and Indian investors who own US shares; Google's advertisers; companies that supply chips, power and data centres for AI; and technology firms whose shares move with Alphabet's.

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