📉 Google's $165B Market Drop!

Hey there,

Google’s market cap plummeted by a whopping $165 billion in a single day! 📉 

But what led to this sudden decline?

First some quick context: Everyone knows Google for its search engine. However, the company has ventured into many areas like cloud computing, advertising, and artificial intelligence. And out of many industries, they are a leader in some. This year, because of the AI boom, Google is up 40%.

Yet, Google saw a major setback on Wednesday. Its stock went down by 10% in a day. Let's understand why.

1. Lower-than-Expected Earnings from Cloud Business:

• Google Cloud reported an operating income of $266 million. This fell short of the estimated $434 million.

• The cloud segment generated revenue of $8.4 billion against the expected $8.64 billion. This is up 22% year over year, marking its slowest rate of growth since early 2021.

2. Microsoft Winning the AI Race:

• Since the launch of ChatGPT, AI has been hailed as the next big revolution to come out of Silicon Valley. And, ChatGPT is owned by Microsoft.

• This ownership contributed to Microsoft reporting robust quarterly results. The revenue reported was $56.5 billion, showcasing strength in the AI domain. The company's success in AI is due to substantial customer demand for its AI cloud offerings.

3. Heavy Competition from Amazon and Microsoft:

• Amazon's AWS and Microsoft's Azure hold significant market shares. Google's recent performance indicates a widening gap between them. Google ranks 3rd amongst the top companies in cloud computing - Amazon (32%), Microsoft (11%), Google (11%), Alibaba (4%), and IBM (3%).

All of these factors contributed to the huge crash in Google's market capitalization. Co-founders Larry Page and Sergey Brin lost nearly $20 billion in net worth due to the stock crash.

While Google has been a dominant player for years, this event highlights the need for innovation and adaptability.

The company's future growth will depend on its ability to strengthen its cloud business, stay competitive in AI, and navigate the challenges posed by its rivals.

However, with its strong foundation in search and online advertising, Google remains a formidable player in the tech space.

The question now is, how will Google respond to these challenges? What strategies will it employ to reclaim its lost ground and continue to thrive in the ever-evolving digital landscape?

✍️ Jargon of the day

Market Capitalization - The total market value of a company's outstanding shares. It is calculated by multiplying the current stock price by the total number of outstanding shares.

After the fall, Google's market capitalization is estimated to be around $1.59 trillion.

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Cheers,
Karthik