Tesla, Alphabet Stocks Crash on AI Capex Plans
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- Tesla stock closed 14.5% lower and Alphabet dropped 7.1% on Thursday, erasing roughly $200 billion and $300 billion in market cap respectively after both signaled increased AI spending on their Q2 earnings calls.
- Amazon was dragged down with the two tech giants, falling 4.6% and shedding about $120 billion in market value.
- Alphabet raised its 2025 capex forecast to $195 billion–$205 billion (up from $180 billion–$190 billion) and warned of higher figures in 2027, with both companies reporting negative free cash flow for the second quarter.
- Tesla reported Q2 capex surging 142% year-on-year to $5.79 billion and expects more than $25 billion in capex for the full year.
- Elon Musk defended the spending on the earnings call, saying he is 'confident' investments will yield 'the best capex returns that we've ever seen' and highlighted first-generation production lines being installed for Optimus, Tesla's humanoid robot.
- Alphabet's CFO attributed the spending increase to 'an acceleration in the delivery of capacity to meet growing demand,' though analysts cited continued delays to Gemini 3.5 Pro and a lack of standout product releases as concerns.
- Google Cloud revenue jumped 82% to $24.8 billion with operating margin rising to 35.6% from 20.7% a year earlier, beating forecasts and prompting one portfolio manager to call it 'one of the strongest revenue growth quarters that Alphabet has had in five years.'
Why it matters: Alphabet raised its 2025 capex forecast by up to $15 billion while warning of higher 2027 spending — and both companies posted negative free cash flow — testing investor patience with AI infrastructure bets that have yet to produce matching revenue proof. Tesla's 142% capex surge shows the same scrutiny now hitting automakers building physical AI like Optimus, not just Big Tech's AI-native players.
