Spending strikes again: Tesla and Alphabet are being punished by investors for lofty capex plans

Tesla and Alphabet shares plunged on Thursday after both companies unveiled massive capital expenditure plans for AI projects, with Tesla stock falling 15% and Alphabet dropping 8%. Tesla raised its 2026 capex forecast to over $25 billion, while Alphabet increased its projection to between $195 billion and $205 billion, spooking investors eager for returns on AI spending. "Tech giants are spending on AI like there's no tomorrow, but investors have realized it's tomorrow they care about," said cross-asset analyst Nic Puckrin.

Spending strikes again: Tesla and Alphabet are being punished by investors for lofty capex plans Business Insider https://www.businessinsider.com Tesla and Alphabet shares crumbled on Thursday. Soaring capex has spooked investors, who are eager to see AI projects finally yield some return. - Big post-earnings drops in Tesla and Alphabet pressured the sector on Thursday. - In both cases, investors are balking at the spending projections as the companies pursue AI projects. - Tesla stock cratered 15%, while Alphabet was down 8%. Gone are the days when investors went along cheerily with Big Tech's plans to spend enormous sums on AI projects. That fact was on display with the precipitous post-earnings declines in shares of Tesla and Alphabet on Thursday. Elon Musk's EV maker saw its stock drop as 15%, while the Google parent fell 8%. Tesla https://markets.businessinsider.com/stocks/tsla-stock and Alphabet https://markets.businessinsider.com/stocks/goog-stock both reported earnings https://www.businessinsider.com/tesla-q2-earnings-updates-tsla-stock-elon-musk-spacex-2026-7 for the second quarter https://www.businessinsider.com/google-just-made-an-extra-98-billion-on-its-investments-2026-7 on Wednesday. Tesla boosted its capex projection for the year to over $25 billion, with Musk describing this year's spending as "massive" on the call with investors. Meanwhile, Alphabet bumped up its capex projection from $180 billion to $190 billion, to a range of $195 billion and $205 billion. The staggering AI bill overshadowed a strong quarter for Alphabet and added to pressures for Tesla, which beat on revenue but missed estimates for earnings per share. "Tesla's and Alphabet's earnings are two sides of the same coin," stated cross-asset analyst Nic Puckrin. "Tech giants are spending on AI like there's no tomorrow, but investors have realized it's tomorrow they care about." Alphabet delivered one of its strongest quarters in years. The market's reaction makes it clear, though, that investors are getting antsy to see a return on capex spending https://www.businessinsider.com/ai-stocks-chips-rally-mag7-divergence-hyperscalers-hardware-memory-2026-7 , especially as Alphabet's free cash flow goes negative https://www.businessinsider.com/google-q2-2026-earnings-historic-negative-cash-flow-ai-costs-2026-7 for the first time in decades. The big moves down in Tesla and Alphabet shares combined with a sharp jump in oil prices and bond yields, sending major indexes sharply lower in Thursday trading. Here's where major indexes stood around 11:45 a.m. ET: : 7,390.83, down 1.4% S&P 500 : 51,655.61, down 1.08% -562.97 Dow Jones Industrial Average points 28,352.68, down 2.2% Nasdaq 100: Several Wall Street banks lowered their Tesla stock price targets after earnings, though a number of analysts feel that the spending is necessary for the company to deliver on the initiatives it has been promising for years. "We view the heavy expenditures as Tesla laying the foundation for its real-world AI—namely autonomous vehicles and humanoid robots," wrote Morningstar analyst Seth Goldstein. "While these new ventures are unlikely to generate meaningful results in the near term, we see strong long-term growth for both products." Morningstar analyst Malik Ahmed Khan shared a similar perspective on Alphabet due to its exposure to chips, infrastructure, and AI models, which he said justifies a bullish $415 price target, a 31% jump from Thursday's price. Bob Lange, founder of Explosive Options, noted that while Google's capex estimates https://www.businessinsider.com/3-biggest-takeaways-from-google-second-quarter-earnings-ai-spending-2026-7 are dragging the stock down after earnings, the company faces a dilemma, as it's locked in a race for AI supremacy with its Big Tech rivals. "I think the market is going to pretty soon understand that that there's there's going to be a limit to how much they can keep increasing capex, and this may be it right herem" he noted. "I don't think the market is appreciating the fact that every incremental dollar that they're spending in capex is going to be a huge return on their for their shareholders. Following the report, Morgan Stanley analyst Andrew Percoco said he expects to see the stock ultimately recover, though he highlighted some concern regarding the cash burn described by https://www.businessinsider.com/elon-musk-tesla-capex-ai-spend-efficiency-2026-7 Musk during the call, leading his team to scale back its price target "We view Tesla's accelerating capex cycle as a necessary investment to secure leadership in autonomy & robotics /category/robotics ," he wrote in a note to investors. "However, these investments push FCF further into negative territory, increasing focus on tangible Robotaxi & Optimus milestones. We lower our PT to $400 reflecting elevated cash burn." Business Insider https://www.businessinsider.com/tesla-alphabet-stock-price-q2-earnings-capex-ai-spending-tsla-2026-7 Get AI news in your inbox Daily digest of what matters in AI.