Why Alphabet (GOOG) Stock Drops On Thursday

Alphabet GOOGL shares edged down about 2.5% Thursday morning after the U.S. safety regulator said Waymo recalled 3,067 autonomous vehicles in November over a software issue.

The recall followed reports that some Waymo cars failed to stop behind school buses with extended stop arms. Waymo issued software updates and completed corrective actions by Nov. 17, the agency said.

The NHTSA opened a probe after media accounts and local authorities flagged multiple incidents, including at least 19 reports in Texas since the school year began. The agency has given Waymo until Jan. 20 to respond to its questions.

Waymo has recorded about 14 million rides this year and has expanded into new U.S. cities, and recently won approval to test self-driving systems in New York City.

Regulatory scrutiny adds reputational risk for Alphabet as Waymo scales operations, analysts said. Competitors include Tesla (TSLA) and Amazon (AMZN), while ride-hailing partners such as Lyft (LYFT) and Uber (UBER) watch developments closely.

Investors will monitor the NHTSA review and any further software fixes soon.