Alphabet stock drop: record 12% selloff erases $500B and reprices the megacap AI trade

Alphabet stock dropped roughly 12% in Thursday's session, the worst day on record for the company and one that erased about $500 billion in market value. The trigger was a third-quarter report that missed on EBITDA and revenue and, more tellingly, delivered negative quarterly free cash flow of $9.07 billion. By the close, Amazon and Intel had added their own disappointments after the bell, and Nasdaq-100 futures were pointing about 2.1% lower with S&P futures near minus 1% heading into Friday. The headline is a de-rating of the megacap AI trade, and it was long overdue for a test. The surprise is what happened beneath it: 9 of 11 S&P 500 sectors rose on Thursday, and the money that left tech…