Google's AI Mode just helped erase $500B of Alphabet in a day

Alphabet fell about 13% on Thursday, its worst day since going public in 2004. Estimates of the wipeout range from $482 billion to $511 billion, the second-largest one-day loss for a US-listed company, behind only Nvidia's in January 2025.

The strange part: people are searching more than ever. Pichai said query growth is the highest in five years. But Search revenue rose just 12% to $63.35 billion, down from 19% in Q1 and 17% in Q2, and short of the 15% analysts expected. Chief business officer Philipp Schindler pointed at AI Mode: its strong growth had an impact "because of the lower monetization we were seeing in AI Mode." More searches, thinner money per search.

Then there's the bill. Capex hit $51.4 billion in the quarter, up 114% from a year earlier, leaving free cash flow at minus $9.1 billion, the second negative quarter in a row. Alphabet expects spending to reach about $300 billion in 2027, up from roughly $200 billion this year.

The bright spot is real: Google Cloud more than doubled to $30.7 billion, up 103%. It just wasn't enough to calm investors about the core business.

Why it matters: Google is showing that AI search can win the usage and still pay less, and Wall Street has started pricing that in.