Alphabet loses nearly US$500bn as AI spending climbs

At a glance

• Alphabet shares fell nearly 13 per cent on 29 October 2026, wiping nearly US$500 billion off its market value, the second-largest one-day loss for a US-listed company.

• Investors sold after Google's search revenue missed forecasts and Alphabet's free cash flow was negative, as its quarterly spending on data centres and chips more than doubled.

• Alphabet kept its 2026 spending plan of up to US$205 billion and said spending will "increase significantly in 2027".

• Google has started renting computing power from other companies because its own supply is short, and chief executive Sundar Pichai says a new customer asking for 2027 capacity would be "incredibly difficult" to serve.

• In Australia, NVIDIA's eight partners are preparing up to 2GW of land, power and buildings for AI data centres by 2027, the year Pichai says Google would struggle to serve new customers.

Alphabet, Google's parent company, lost US$482 billion of market value on 29 October 2026, by Yahoo Finance's calculation, after its September-quarter results showed weaker search revenue than forecast and negative free cash flow. Its shares fell nearly 13 per cent, their worst day since Google listed in 2004, and only Nvidia has lost more in a single day as a US-listed company, Yahoo Finance reported.

Investors questioned the spending that builds Google's computing capacity. Alphabet spent US$51.4 billion on servers, data centres and other equipment in the quarter, more than double a year earlier, and told analysts that spending will rise significantly again in 2027. It is also short of capacity: Google has started renting computing power from other companies, and Google and Alphabet chief executive Sundar Pichai says a new customer seeking capacity for 2027 would be hard to serve.

Investors sold Alphabet after a quarter in which its spending on data centres and equipment more than doubled, and Alphabet said it will spend more in 2027 while it rents extra computing power to meet demand. NVIDIA's eight Australian partners are preparing up to 2GW of data centre capacity by 2027.

Search missed forecasts and free cash flow was negative

Google's search and related revenue rose 12 per cent to US$63.4 billion in the September quarter, short of analysts' forecasts, CNBC reported. Alphabet reported negative free cash flow of US$9.1 billion as spending on infrastructure and on chips for its TPU system sales rose, Alphabet chief financial officer Anat Ashkenazi told analysts.

Suppliers to data centre builds fell too. Shares in Caterpillar, which makes machinery used on data centre sites, fell 9 per cent in early trade on 29 October, and the Philadelphia semiconductor index dropped 1.6 per cent, NBC reported.

Alphabet will spend more in 2027

Ashkenazi kept the company's 2026 capital spending forecast at US$195 billion to US$205 billion and told analysts on the earnings call that spending will "increase significantly in 2027", with details due on Alphabet's December-quarter call.

Google Cloud, the business that rents computing power and AI chips to companies, lifted its revenue 103 per cent to US$30.7 billion in the quarter, Alphabet's results release shows, and Ashkenazi put its backlog of contracts signed but not yet billed at US$561 billion, with just over 55 per cent expected to become revenue within 24 months.

Source: Alphabet, third quarter 2026 results, 28 October 2026.

Google is renting computing power to cover a shortfall

"Given the supply-constrained environment, we started utilizing third-party compute capacity at the end of Q3 and will ramp usage in Q4," Ashkenazi said on the call, adding that the rented capacity would weigh on Google Cloud's margins in the near term. Google Cloud chief executive Thomas Kurian said Google is also placing systems built on its own TPU chips in other companies' facilities, through partnerships with companies including Oracle.

Pichai described the shortage in an interview on Alex Kantrowitz's Big Technology Podcast, published on 20 October. "If today a customer is coming out and asking us for compute in '27, that is incredibly difficult to do," he said. "The compute we have today is a function of decisions I made in 2024," he told Big Technology, adding that "everyone is short".

NVIDIA's Australian partners are readying up to 2GW by 2027

NVIDIA named eight Australian partners on 9 September 2026 for up to 2GW of land, power and building shells by 2027 for AI factories, the AI data centres fitted out to run large clusters of AI chips. They range from operators of data centres in Australia to GPU cloud providers, and include AirTrunk, CDC and NEXTDC. Projects not yet approved or connected face about two years of due diligence, planning consent and grid connection in Victoria and longer in New South Wales, according to infrastructure investors interviewed for our report on the latest forecast from industry body Data Centres Australia and researcher DC Byte.

Anthropic is seeking capacity for the same year. Its request for proposal for Australian capacity, reported by the Australian Financial Review in July, sought at least 1GW in use by the end of 2027.

The AFR reported in March that Google had told the Australian Government it was pausing a planned A$20 billion AI hub, over concern that a large local build could lead the Australian Taxation Office to tax more of its Australian earnings at 30 per cent. A Google spokesperson said the company was "not asking for incentives, public funds or changes to the treatment of its existing businesses in Australia", Information Age reported.

What to watch

• Alphabet's December-quarter results, where it will give details of its 2027 capital spending.

• Where Google rents its extra computing power, and whether any of it is in Australia.

• Any decision by Google on its A$20 billion Australian hub, and any Australian Taxation Office guidance on when a data centre creates a taxable presence.

• Anthropic's awards from its Australian tender, and which of NVIDIA's eight partners have capacity running in 2027.