Alphabet and Tesla shares fell as investors reacted to significant increases in capital expenditures for artificial intelligence.
Alphabet and Tesla saw substantial share price declines on Thursday as investors reacted to the mounting costs of the artificial intelligence boom. Alphabet shares fell over 6% after the company raised its annual capital expenditure forecast to $205 billion, while Tesla stock dropped 14% following a surge in spending. Both firms reported negative free cash flow for the second quarter, marking a period of heavy investment in infrastructure. Alphabet's chief executive, Sundar Pichai, noted that while the technological shift to AI is in its early stages, the company remains disciplined in its spending to meet growing demand. Meanwhile, Tesla CEO Elon Musk expressed confidence that the massive investments in semiconductor production and the Optimus humanoid robot will yield significant returns. Despite the heavy spending, Alphabet saw strong growth in cloud revenue, and Tesla's core automotive business reported a 23% year-on-year revenue increase. Analysts suggest that while the high costs have spooked some investors, the "picks and shovels" of the AI infrastructure trade are positioned to benefit from this aggressive spending cycle.