Investors punished Alphabet and Tesla after both firms reported negative free cash flow and warned of higher capital expenditures for AI.
Alphabet and Tesla reported better-than-expected revenue for the latest quarter but saw shares fall after disclosing negative free cash flow and plans for increased AI-related spending. Alphabet’s stock dropped over 3% in after-hours trading, while Tesla slid 4%, signaling investor unease over rising capital expenditures.
Both companies have faced mounting pressure as AI infrastructure costs surge, with Alphabet’s stock declining for three consecutive months and Tesla down 17% year-to-date. The tech-heavy Nasdaq has fallen about 5% since its early June peak, reflecting broader concerns about returns on AI investments.
Meta, Microsoft, Amazon, and Apple are set to report next week, with markets watching closely for signs of similar spending trends. The emergence of cheaper open-source AI models and corporate frugality on AI services has added to skepticism about future profitability.