Alphabet, Tesla Stocks Dive on AI Spending Fears
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- Alphabet shares fell more than 7% after reporting negative free cash flow of $5.9bn for Q2—the first such deficit since its 2004 IPO—even as quarterly revenue grew 23% to $119.8bn.
- Tesla shares plunged 13.5% after posting negative free cash flow of $1.1bn in Q2, its first negative cash showing in two years.
- Alphabet spent $45bn on capex in Q2 (60% servers, 40% data centers) and raised its 2025 spending guidance to as much as $205bn—a $15bn jump from its estimate just three months ago.
- Tesla plans to spend up to $25bn this year, more than double its 2025 capital outlay, with CFO Vaibhav Taneja warning it's in "a big investment cycle" likely to intensify over the next three years.
- Google CFO Anat Ashkanazi said AI demand "still outpaces investment," while AJ Bell's Russ Mould flagged "a healthy degree of scepticism about the ability of these investments to generate a commensurate level of return."
Why it matters: Alphabet's first negative free cash flow since going public shows that AI capital expenditure has grown large enough to materially distort the cash engine of one of the world's most profitable companies, while Tesla's parallel cash reversal signals the AI capex cycle is now broad enough across Big Tech to override even strong 23% revenue growth as a market comfort signal.
