Tesla and Alphabet shares fell sharply on Thursday, July 23, 2026, after both companies signaled plans to increase capital expenditure for artificial intelligence.
Tesla stock plunged 14 percent while Alphabet sank over 6 percent following their second-quarter earnings reports.
Both technology giants logged negative free cash flow for the quarter despite revenue growth in key operating divisions.
Capital Expenditure Outlook
Alphabet expanded its full-year capital outlay projection to between $195 billion and $205 billion, warning that costs will rise further in 2027.
Tesla reported that its second-quarter capital expenditure jumped 142 percent year-on-year to $5.79 billion, projecting annual spending to top $25 billion.
Company executives argued that the heavy outlays will drive future financial returns.
Elon Musk, CEO of Tesla, said, "This is a massive capex year. I'm confident that all the things that we're investing in will yield incredible returns."
Musk pointed to long-term projects including semiconductor production lines and Optimus, the firm's humanoid robot program.
Tesla confirmed that initial production lines for Optimus are currently being installed.
Alphabet's chief financial officer stated that the spending increase "is primarily due to an acceleration in the delivery of capacity to meet growing demand."
Despite management assurances, market analysts highlighted growing investor skepticism regarding immediate profitability.
Ben Barringer, Head of Technology Research at Quilter Cheviot, said investors are focusing on the sharp rise in capital expenditure and weaker margin outlook.
Barringer noted that continued delays to Gemini 3.5 Pro and a lack of standout product releases have raised questions about Alphabet's AI investments translating into competitive advantage.
Financial analysts also identified positive revenue indicators within the quarterly reports.
Google Cloud revenue increased 82 percent to $24.8 billion, exceeding market expectations while its operating margin widened to 35.6 percent from 20.7 percent a year earlier.
Alison Porter, Portfolio Manager at Janus Henderson, said, "This is one of the strongest revenue growth quarters that Alphabet has had in five years."
Porter noted that the performance of the cloud business validated the scale of ongoing technology investments across major platforms.
Tesla reported that its core automotive segment generated $20.52 billion during the second quarter, marking a 23 percent increase year-on-year.
