Alphabet fell 5%, its worst day in a year, after two top researchers quit for OpenAI and Anthropic

Alphabet’s stock closed down almost 5% on Monday, making it Google’s worst trading day in over a year.

The decline coincided with two prominent researchers leaving to join competitors and growing concerns about artificial intelligence.

It was the company’s biggest decline since a roughly 7% decline in May 2025, and it was larger than the Nasdaq and the other major tech names.

A series of employee layoffs at Google’s primary AI teams preceded the sell-off.

Noam Shazeer, a vice president of engineering and co-lead of Google’s Gemini AI models, announced on Wednesday that he was quitting to join rival OpenAI, which sparked the controversy last week.

Less than two years prior, Shazeer had returned to Google.

John Jumper, a Nobel Prize winner and senior research scientist at Google, announced late on Friday that he was quitting the DeepMind AI lab to join Anthropic.

Analysts speculate that Google may be losing ground in the AI battle and finding it difficult to retain top AI personnel as a result of these exits.

Last year, Google briefly took the lead with an innovative methodology, but since then, rivals and well-funded AI firms have escalated the competition for talent.

Concerns regarding Google’s position have been heightened by the departure of important AI researchers to competitors.

At just 13% odds, traders are placing bets on Polymarket to determine which AI model will be the best by the end of July.

Search business under threat

Since the introduction of ChatGPT, generative AI has posed a danger to Google’s future. Recently, ChatGPT surpassed one billion monthly active users.

There are two risks: first, Google would lose its dominance; second, by retaliating, it might harm its own search business, which depends primarily on advertising. There are some visible cracks.

While ChatGPT traffic has increased over the last month, Google’s search traffic has decreased by more than 1%.

As it promotes a “no-AI” option through new browser features, search engine DuckDuckGo is experiencing an increase in installs.

Open-source Chinese models like DeepSeek and z.AI may also put pressure on Google and other leading US AI companies.

These are significantly less expensive options and have capabilities comparable to those of the major American versions.

Spending fears rattle investors

In addition to the loss of expertise, concern over the enormous expense of developing AI is growing.

Investors are blaming the AI trade for the global decline in markets.

Depending on how much risk investors are willing to take, the boom has been powered by billions of dollars being invested in software and data centers.

In fiscal 2026, Google alone has announced intentions to spend between $180 billion and $190 billion, primarily on data centers and AI computing.

It is now difficult to disregard the financial math. Alphabet has cautioned that its capital expenditures will increase significantly in 2027 and anticipates spending between $180 and $190 billion in 2026.

Operating cash flow increased to $45.8 billion in the first quarter, but capital expenditures more than doubled to $35.7 billion.

This reduced free cash flow from over $19 billion a year earlier to little over $10 billion.

The tech industry’s poor day reflects rising skepticism about whether all of this expenditure will result in long-term profit.

“Simply said, the market is drawing a sharp line between AI spenders and AI earners,” Wagner stated.

“The big spending hurts the hyperscalers’ margins, while those massive hardware orders directly benefit memory manufacturers.”

In a recent Wall Street Journal interview, Microsoft CEO Satya Nadella stated that models may become more affordable and simpler to replace, raising questions among investors about whether the expenditure actually provides a competitive advantage.

The uncertainty permeated the tech industry.

Dutch semiconductor manufacturer ASML had a 5% decline, while memory chip manufacturers Samsung Electronics and SK Hynix each saw a 12% decline.

After dropping 16% on Monday, SpaceX shares appeared likely to continue their three-day losing skid.

There were also additional losses for the larger Magnificent Seven group.

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