Google, Tesla shares plunge as AI spending strains cash flow
This digest was compiled by AI from multiple sources — links to the originals are below.
Shares of Alphabet and Tesla fell sharply on Thursday after both reported negative free cash flow and pledged billions more in AI spending. Alphabet's stock dropped over 7%, while Tesla fell 13.5%. The sell-off reflects investor skepticism about near-term returns from massive AI investments.
Negative Cash Flow
Alphabet reported negative free cash flow of $5.9 billion for the first time since going public in 2004, according to its financial records. Tesla also posted negative free cash flow, though the exact figure was not disclosed. Both companies attributed the shortfall to surging capital expenditures on AI infrastructure.
Spending Plans
Alphabet now expects to spend up to $205 billion this year, mainly on AI projects, a $15 billion increase from its estimate three months ago. Tesla plans to spend up to $25 billion on unspecified projects. Alphabet's CFO Anat Ashkanazi said 60% of Q2 spending went to servers and 40% to data centers, adding that "demand still outpaces that investment."
Market Reaction
The Nasdaq composite fell 2.6% as tech earnings sparked AI spending worries, according to Reuters. Oil prices hitting $100 a barrel added to market jitters. Alphabet's revenue rose 23% to $119.8 billion, but investors focused on the cash burn. Russ Mould of AJ Bell noted "healthy skepticism" about returns on AI investments.
What's Next
Investors will watch for further earnings reports from other big tech firms in the coming weeks. It remains unclear whether AI spending will translate into revenue growth or continue to pressure margins.
10 sources
Google, Tesla shares plunge as AI spending strains cash flow
