Tesla Sinks 13%, Alphabet Drops 7% as AI Capex Surge Spurs Cost Fears

3 articles · Updated · CNBC · Jul 23

Tesla fell 13% and Alphabet more than 7% on Thursday after both companies posted negative second-quarter free cash flow and signaled heavier AI-related spending.
Alphabet lifted its 2026 capital-expenditure forecast to $195 billion-$205 billion from $180 billion-$190 billion and warned 2027 spending would rise further, while Tesla said Q2 capex jumped 142% to $5.79 billion and should exceed $25 billion this year.
Management argued the spending is aimed at capacity and future products: Alphabet said it is accelerating infrastructure to meet AI demand, and Tesla pointed to semiconductor work and first-generation Optimus production lines.
Some operating results were stronger than the share moves suggested, with Google Cloud revenue up 82% to $24.8 billion and margin rising to 35.6%, while Tesla's automotive revenue increased 23% to $20.52 billion.
The selloff shows investors are still demanding clearer near-term returns from the AI buildout, especially as higher capex pressures margins and cash flow.

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Overview

In July 2026, Tesla chose to prioritize long-term growth by investing heavily in advanced technologies like autonomy, robotics, and AI, even though this meant sacrificing near-term profitability and straining its free cash flow due to rising operating costs and external pressures like commodity prices and interest rates. Meanwhile, Alphabet reported strong revenue and profit growth, driven by its booming cloud and AI businesses, but faced a muted stock market reaction as investors wanted even more aggressive capital spending on AI infrastructure. Both companies’ strategies highlight the intense competition and massive investments shaping the future of the tech industry.

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