Google’s parent company, Alphabet, faced a tumultuous Monday as its stock plummeted by 4.5%, marking its second-largest single-day loss in a year and shedding a staggering $90 billion in market value. The sharp decline was prompted by mounting concerns over Google’s generative artificial intelligence product, Gemini, sending shockwaves through Wall Street.

The controversy surrounding Gemini intensified following a series of issues, including its image-generating service producing racially inaccurate depictions of historical figures. Additionally, the AI chatbot associated with Gemini sparked further outrage by declining to distinguish the more negatively impactful historical figure between Adolf Hitler and Elon Musk. Consequently, Google admitted to having “missed the mark” with Gemini’s initial rollout, leading to the suspension of its AI image service for the next few weeks.

Analysts expressed apprehension over these developments, with Loop Capital’s Rob Sanderson labeling it a “meaningful blunder in the PR battle surrounding generative AI.” This sentiment was echoed by Melius Research analysts Ben Reitzes and Nick Monroe, who emphasized the importance of brand perception, stating, “If Google is seen as an unreliable source for AI to a portion of the population, that isn’t good for business.”

The repercussions extended beyond Wall Street, with Alphabet’s losses overshadowing an otherwise uneventful day of trading for major stock indexes. Notably, Alphabet emerged as the most significant percentage decliner among S&P 500 constituents with a market capitalization exceeding $50 billion.

The fallout from the Gemini debacle underscores broader implications for Alphabet’s dominance in the online search market. Melius researchers suggested that Google’s entanglement in the cultural debate could erode its stronghold, particularly considering the increasing role of AI in online search. This setback adds to Alphabet’s previous missteps in the AI arena, notably its AI chatbot service announcement last February, which resulted in a similar market capitalization plunge due to factual errors.

Despite the setback, Alphabet remains optimistic about its long-term prospects. However, the company’s stock performance this year, trailing behind major indices and competitors like Microsoft and Meta, underscores the challenges it faces in maintaining its position as a leader in the tech industry.