Alphabet Loses $692 Billion in Market Value as AI Questions Rise

(Bloomberg) -- For much of the last year, Alphabet Inc. has been the Big Tech stock to beat as investors bet that it was the most-likely winner from the artificial intelligence boom.

Alphabet shares hit an all-time high on May 13 after soaring more than 150% in the previous 12 months, putting them among the 25 best performers in the S&P 500 Index over that stretch and far outpacing the other Magnificent Seven technology giants. But the momentum has reversed since then due to questions about a brain drain at Google's parent and fears that the company is losing its edge in AI.

The stock is down 15% from its peak, erasing $692 billion in market value and making it the second-biggest point drag on the S&P 500 in that span. At the crux of the selloff is Alphabet's suddenly shaky standing in the AI race, with its heavy spending on building out the infrastructure to develop the technology and the delayed release of its new Gemini AI model weighing on investor sentiment.

A few months ago, Google lost two top employees to Anthropic PBC and OpenAI. Earlier this month, Jeff Dean, who was key to Google's AI strategy, departed to launch a startup and took several high-profile coworkers with him. And Demis Hassabis stepped down as chief executive officer of the Google DeepMind AI research lab, accepting a new role as chairman. Those moves sent Alphabet shares tumbling 4% on Aug. 5, erasing $186 billion in market value in a single session.

"You've had this kind of brain drain," said Angelo Zino, senior vice president and head of technology at CFRA. "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?"

Of course, Alphabet is hardly the only firm challenged by Big Tech's talent race. Last year, Meta Platforms Inc. poached Ruoming Pang from Apple Inc., where he ran the iPhone maker's AI models team, with a $200 million multi-year compensation package and then brought in a couple of his senior deputies.

Around that time, OpenAI Chief Executive Sam Altman complained that Meta was offering his employees signing bonuses of as much as $100 million to join its top AI team. Meanwhile, OpenAI has lured more than 400 Apple employees with rich salaries and hefty stock option offers. And Apple has sued OpenAI for stealing trade secrets.