Google-owner Alphabet lost just over $500bn (£374bn) in value on Thursday after it revealed its own artificial intelligence (AI) summaries were hitting search advertising revenue.

Chief business officer Philipp Schindler said Google’s “AI mode”, where it answers questions conversationally, was eating into the money it makes from ads which appear next to results to traditional search questions.

Yet, Schindler said he felt “very good about our trajectory” with an AI-focused version of the search engine.

Google’s role in answering the world’s questions has been challenged by the AI boom, with millions of people using programs such as ChatGPT and Claude instead.

Kim Scott, who formerly led Google’s advertising business, told the BBC’s Today programme that the company would “rather eat its own lunch than allow someone else to eat their lunch” by having its own AI summaries hit its search revenue.

She said that Google was founded on the idea of making long-term bets on technology – even if they hurt the firm in the short term.

“I think they’re making a long-term bet on AI,” she said.

In its results published on Wednesday, Alphabet revealed that total revenue grew 25% in the three months to the end of September, compared to the same period last year, hitting $127.6bn.

However, the firm did not make as much money as analysts had predicted, particularly in its advertising arm, which spooked many investors.

Shares in the company plummeted over 12% to a six-month low following the release of the results.

By the end of Thursday, the company’s total stock market value had fallen to $3.46 trillion from $3.97 trillion the day before.