Google Stock Drops 5% After AI Division Reports Slower Growth
Google parent Alphabet Inc. (GOOGL) saw shares fall 5% in early trading Monday after its AI division reported slower-than-expected revenue growth. The drop erased nearly $90 billion in market value as investors reacted to signs that Google's artificial intelligence investments aren't yielding immediate financial returns.
The decline comes exactly one week after Google Cloud Next 2026, where the company showcased new AI products. Analysts had expected stronger performance from Google's AI services, which face growing competition from Microsoft and Amazon. "The market expected AI to drive next-level growth by now," said Wedbush analyst Dan Ives.
Google stock had gained 18% year-to-date before today's drop, fueled by optimism about its Gemini AI platform. The sudden reversal makes Alphabet the worst performer among Big Tech stocks today. Rivals Microsoft and Apple are trading flat amid broader market stability.
The sell-off reflects growing investor impatience with tech companies' AI spending. Google has invested over $50 billion in AI infrastructure since 2023. Some shareholders now question when these investments will significantly boost profits. "AI is a long game," countered Alphabet CFO Ruth Porat during an emergency analyst call this morning.
Retail investors appear divided, with Google stock seeing unusually high trading volume. Over 12 million shares changed hands in the first hour of trading - triple the average volume. The volatility comes as individual traders debate whether to buy the dip or cut losses.
Google remains the third-most valuable U.S. company at $1.72 trillion, behind only Microsoft and Apple. But today's drop narrows its lead over fourth-place Amazon. The stock last traded this low on March 28, before its recent AI conference rally.
Market analysts will watch for stabilization when NASDAQ trading resumes at 1 p.m. ET. The broader tech sector appears unaffected so far, with the NASDAQ-100 index down just 0.3% at midday. Google's next earnings report on April 25 now carries heightened significance for investor confidence.
