How can a publicly traded company lose billions of dollars in one day and what happens with that money?

Question

E.g., Google lost $100b after its AI made a factual error in a demo.

Or when Musk lost $200b.

What happens with that loss? Do they need to do layoffs specifically because of that? Close massive projects? How can a company continue to even exist after that kind of financial loss?

Thanks!

In: 5

Answer 1

They do not lose billions of *dollars*, they lose billions of dollars worth of *value*. No actual money moves around.

If you have a pet rock, and people come up to you every day offering to buy it from you for $100, then your pet rock is worth $100. If one day people suddenly start offering to buy it for $10 and laughing at the idea of $100, then your pet rock has lost $90 worth of *value*. But no matter how much it’s *worth*, the value never turns into money until the moment you sell it.