Shares of Alphabet and Tesla declined sharply in premarket trading Thursday after both companies disclosed plans for significantly higher AI-related spending, raising concerns among investors about the escalating costs of the artificial intelligence boom.
Alphabet shares dropped approximately 4% before the opening bell, while Tesla’s stock fell more than 5%. The declines came after both companies reported negative free cash flow for the second quarter on Wednesday and outlined substantial capital expenditure increases ahead.
Alphabet raised its capital expenditure forecast for this year to a range of $195 billion to $205 billion, up from its previous projection of $180 billion to $190 billion. The Google parent company also cautioned that spending would climb even higher in 2027.
Tesla disclosed that its capital expenditure surged 142% year-over-year in the second quarter to $5.79 billion. The electric vehicle maker said it expects to spend more than $25 billion in capital expenditures this year.
Management Defends Spending Plans
Executives at both companies attempted to reassure investors that the heavy spending would generate substantial returns. Tesla CEO Elon Musk emphasized his confidence in the investment strategy during the company’s earnings call Wednesday.
“This is a massive capex year. I’m confident that all the things that we’re investing in will yield incredible returns. Really, maybe the best capex returns that we’ve ever seen,” Musk said, according to CNBC.
Musk highlighted specific areas receiving investment, including semiconductor production and Optimus, Tesla’s humanoid robot project. The company said in its earnings presentation that it is “installing the first-generation lines for Optimus” and will “start production soon.”
Alphabet’s CEO attributed the spending increase primarily to an acceleration in capacity delivery to meet growing demand. The tech giant has maintained it lacks sufficient computing capacity to satisfy the AI demand it currently faces.
Positive Revenue Signals Overshadowed
The spending concerns overshadowed some encouraging financial results at both companies. Google’s cloud revenue jumped 82% to $24.8 billion, surpassing analyst forecasts and suggesting that some of the company’s investments are beginning to pay off.
Tesla’s core automotive business also showed strength, generating $20.52 billion in revenue, up 23% year-over-year.
The market reaction underscores growing investor anxiety about whether the massive capital investments in AI infrastructure will ultimately justify their costs, even as both companies demonstrate revenue growth in key business segments.
Source: www.cnbc.com — https://www.cnbc.com/2026/07/23/tesla-tsla-alphabet-googl-stock-today.html
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