Alphabet and Tesla earnings: Surging AI spending sparks investor concerns

Published Jul 23, 01:48 AM UTC

Alphabet and Tesla reported quarterly earnings that revealed massive increases in capital expenditures, primarily driven by AI infrastructure investments, leading to negative free cash flow and a subsequent dip in their stock prices. Alphabet forecasted 2026 capex of $195-205 billion, while Tesla reiterated over $25 billion in spending. Despite better-than-expected revenue, investors reacted negatively, with Tesla shares falling 4% and Alphabet dropping over 3% in after-hours trading. The results raise concerns about returns on AI investment, especially amid the rise of cheaper open-source models and corporate frugality. The earnings reports are seen as a potential bellwether for other tech megacaps like Meta, Microsoft, Amazon, and Apple reporting next week.