Alphabet Inc (NASDAQ: GOOGL), the parent of Google, has lost roughly $692bn in market value since shares hit an all-time high on 13 May, after a year of outperforming Big Tech peers on AI optimism, as markets now question whether the spending will pay off.
GOOGL closed yesterday at $342.00, down 1.43% from the previous close of $346.96, and now sits 15% below the $408.37 all-time high it set in May, within a 52-week range that bottoms out at $205.61.
Compounding the scepticism has been a loss of technical talent. Jeff Dean, a senior AI scientist, departed to launch a startup, and Demis Hassabis stepped down as chief executive of Google DeepMind, Alphabet’s AI research lab, to become chairman. Those departures drove a roughly 4% single-day fall in GOOGL, worth about $186bn, on 5 August. Alphabet has also delayed its next flagship AI model, Gemini 3.5 Pro, releasing the smaller Gemini 3.7 Flash instead.
The capex numbers underpinning the scepticism are stark. Alphabet’s second-quarter capital expenditure reached $44.9bn, roughly double the year-earlier figure, and it has raised its full-year guidance to a range of $195bn-$205bn. That spending pushed second-quarter free cash flow, the cash left after operating and capital costs, to negative $5.9bn, and chief financial officer Anat Ashkenazi has warned free cash flow will stay squeezed as investment continues.
Angelo Zino, senior vice president and head of technology at research firm CFRA, said the talent losses raise the pressure on Alphabet to prove its AI spending pays off. “You’ve had this kind of brain drain. It does pose some risk because it’s the area of the market everybody is looking at at this point in time, right? It’s, you know, can you monetize AI?” he said.
Despite the pullback, Alphabet shares remain up 65% over the trailing 12 months, still ahead of other so-called Magnificent Seven peers. The read-through extends beyond Alphabet: markets are now demanding evidence that AI spending at Microsoft (NASDAQ: MSFT), Meta (NASDAQ: META) and Amazon (NASDAQ: AMZN) is generating visible returns, not simply funding a spending race.