Google is eating itself — but it could still eat everyone else too

{"text":[[{"start":4.4,"text":"Sometimes a disrupter disrupts itself, and on a grand scale. Think of how Netflix’s streaming service smothered its mail-order DVD rental business, or Apple’s iPhone pushed the iPod towards extinction. Now, investors are worried that it’s Alphabet’s turn."}],[{"start":20.4,"text":"The parent of Google shed nearly half a trillion dollars of market value on Thursday after its ad business slowed unexpectedly. New AI-powered searches offer fewer opportunities to present users with ads than the old-fashioned kind, which is a problem because advertising makes up two-thirds of Alphabet’s revenue. Facebook owner Meta Platforms is expanding ad sales more than twice as quickly."}],[{"start":null,"text":"

"}],[{"start":43.12,"text":"While Alphabet’s 11 per cent ad-sales growth in the third quarter is still pretty lively, small changes to the long-term trajectory have a big impact. Its core search business was worth $1.5tn of a $4tn market capitalisation before the company reported its quarterly earnings, based on a Bank of America analysis. Thursday’s drop has theoretically erased a third of that division’s worth."}],[{"start":67.48,"text":"Investors are jittery for two reasons. The multitrillion-dollar race to build AI data centres has Alphabet investing more cash than it makes, creating a possible $40bn shortfall by the end of next year, according to forecasts collated by LSEG. Every dollar that doesn’t come from ad sales must be found elsewhere — either from issuing new debt or equity, or from its growing but lower-margin cloud computing business."}],[{"start":90.92,"text":"Furthermore, Alphabet is on the back foot with its AI products. Anthropic and Cursor, soon to be part of SpaceX, have pulled ahead in the market for software coding agents; Meta’s Muse has jumped ahead in offering so-called agentic personal assistants. Some recent high-level departures from Google’s AI labs add to the sense of uncertainty."}],[{"start":110.4,"text":"Yet it would be rash to assume Alphabet has lost its lustre: leadership in the AI race can be won, lost and won again at speed. A year ago, it was Meta that seemed to be backsliding, after its Llama 4 model proved disappointing. By the same token, in 2024, Alphabet’s AI was telling users to glue cheese to their pizza. Yet even as its stock slumped on Thursday, newly launched frontier AI model Gemini 4 Carbon vaulted to the top of one widely regarded leaderboard."}],[{"start":140.56,"text":"It’s still possible that CEO Sundar Pichai will flub the metaphorical transition from iPod to iPhone. But Alphabet has weathered big shifts before. The sizeable drop in its shares shows how AI has introduced tremendous volatility into the valuations of even the biggest companies. Fortunes can now be lost in the blink of an eye; they can be recouped almost as quickly."}],[{"start":167.84,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1793332373_4841.mp3"}