Alphabet, Tesla Burn Cash on AI as Wall Street Sours
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- Alphabet forecast 2025 capex of $195-205 billion, up from prior guidance of $180-190 billion, while Q2 free cash flow plunged to negative $5.9 billion from nearly +$25 billion a year ago.
- Tesla expects 2025 capex above $25 billion—roughly 200% year-over-year growth—with Q2 capex of $5.79 billion (up 142%) and free cash flow flipping to negative $1.1 billion.
- Both stocks sold off after hours despite revenue beats, with Tesla sliding 4% and Alphabet down more than 3%, as investors weighed the sustainability of the AI spending cycle.
- Google Cloud revenue surged 82% year-over-year, and Mizuho analysts called the capex bump "broadly anticipated," recommending a buy and predicting the stock would recover in trading.
- Elon Musk told investors Tesla should "spend on capex as fast as we can spend" and compared the buildout—spanning Cybercab, Optimus robots, and a Texas AI chip plant—to "the fastest industrial scale-up since World War II in America."
- The AI spending boom faces new pressure from cheaper open-source models largely out of China and signs that corporate America is getting more frugal on AI services, raising return-on-investment questions.
- Meta and Microsoft report next Wednesday, followed by Amazon and Apple on Thursday—results that will test whether the after-hours anxiety extends across the rest of megacap tech.
Why it matters: Alphabet's negative $5.9 billion free cash flow and Tesla's $1.1 billion deficit mark a sharp reversal from a year ago, and the 3-4% after-market drops show investors are no longer willing to underwrite blank-check AI capex without clearer returns. Bullish analysts like Mizuho and Valoir argue the spending is already paying off—Google Cloud revenue jumped 82%—but the broader selloff puts pressure on Meta, Microsoft, Amazon, and Apple to justify their own AI buildouts next week.
