- Alphabet’s sell-off helps drag Nasdaq down 1.4%.
- Alphabet loses around $480bn in market value.
- Pichai defends long-term investment plans amid worries.
NEW YORK: Google parent Alphabet’s shares plunged more than 12% on Thursday, wiping around $480 billion off its market value after disappointing advertising and search revenue growth raised fresh concerns about the returns on its massive technology investments.
Alphabet also signalled that capital spending would continue to rise significantly in 2027, unsettling investors and helping drive the Nasdaq down 1.4%.
European bourses had advanced earlier in the day, with the European Central Bank leaving interest rates unchanged after the Federal Reserve maintained US borrowing costs on Wednesday.
The euro dipped after Christine Lagarde announced she would step down as the ECB’s president in February, but then rose after her press conference.
The drop in Alphabet weighed on all three major US equity indices, led by the tech-focused Nasdaq, which lost 1.4 per cent.
The Alphabet slump came after it reported disappointing growth in both advertising revenue and revenue from its search business.
The company also said it would continue to increase capex spending significantly in 2027 after estimating the 2026 level as between $195 billion and $205 billion.
“I would broadly think of all of this as a long-range planning process, not a short-term allocation exercise,” Google CEO Sundar Pichai told analysts of the company’s investment splurge.
But markets were unnerved by the plan.
The Alphabet report “is renewing concerns about AI investment returns, helping push the Nasdaq sharply lower,” said a note from Briefing.com.
Shareholders “want clear evidence that all of this investment will eventually translate into stronger profits,” Angelo Kourkafas of Edward Jones said.
But Kourkafas noted that the weakness in equities was not broad-based, with Eli Lilly and MasterCard among the companies that gained after earnings reports.
“Money is not exiting equities. It’s just moving around and rotating,” Kourkafas said.
Government data showed US economic growth in the third quarter came in at a better-than-expected 3.4 per cent, with authorities citing solid consumer spending as a factor.
The US Federal Reserve’s preferred gauge for inflation — the Personal Consumption Expenditures (PCE) price index — rose by 3.6 per cent year-on-year in September, an increase from the previous month.
The reports came a day after the Fed kept interest rates flat despite elevated inflation.
As expected by economists, the ECB meanwhile left its benchmark rate unchanged at 2.5 per cent, after having already lifted it twice this year.
The decision came just hours after Lagarde announced she would step down early, in February 2027.
Lagarde gave little away about her next moves at Thursday’s press conference, saying only she wanted to be able to speak more freely on matters outside of monetary policy.
This will stoke expectations that the former French finance minister, who served in centre-right governments, could campaign in the presidential elections, although she has previously ruled out running for the presidency herself.
Eurozone inflation rose to a three-year high of 3.8 per cent in September, driven by surging energy costs amid the Middle East conflict, but the ECB stressed core inflation — excluding food and energy costs — was under control.
“While the full effects of the energy shock are still unfolding, underlying inflation has remained broadly stable so far,” Lagarde said.
