Tesla, Alphabet stock falls as AI spending concerns spook investors
SpaceX, Tesla and Trump was inaugurated for his second non-consecutive term as the 47th president of the United States.
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shares Alphabet And Tesla’s It fell in premarket trading on Thursday after both firms signaled increased AI spending, leaving investors worried about the rising costs of the AI boom.
Alphabet shares fell nearly 4%, while Tesla’s shares fell more than 5% in premarket trading.
Alphabet and Tesla’s posts this year.
Both companies reported negative free cash flow for the second quarter on Wednesday. Alphabet raised its capital spending forecast for this year from $195 billion to $205 billion and warned of higher numbers in 2027. Google’s parent company’s previous capex estimate was between $180 billion and $190 billion.
Meanwhile, Tesla said its capital expenditures rose 142% year over year to $5.79 billion in the second quarter. The company said it expects more than $25 billion in capital expenditures this year.
Management at both companies tried to allay investors’ fears about spending.
Tesla CEO Elon Musk said on Wednesday’s earnings call: “This is a huge year of capex. I’m confident that everything we invest in will deliver incredible returns. Really, maybe the best return on capex we’ve ever seen.”
Emphasizing where the spending is going, Musk talked about the company’s future ventures related to semiconductor manufacturing and Tesla’s humanoid robot Optimus. The company said in its earnings presentation that Tesla has “established first-generation lines for Optimus” and will “begin production soon.”
Alphabet’s CEO said the spending increase was “primarily due to the acceleration in ensuring capacity to meet growing demand.” The technology giant argued that it did not have enough computing capacity to meet the artificial intelligence demand it saw.
Spending figures at both companies offset some bright spots.
There were signs that some of Google’s investments were starting to pay off. Google’s cloud revenue beat estimates, rising 82% to $24.8 billion.
Tesla’s core automotive business generated $20.52 billion in revenue, up 23% year over year.
— CNBC’s Lora Kolodny and MacKenzie Sigalos contributed to this report.
