Tesla, Alphabet lose billions in stock plunge

In Short:
– Alphabet and Tesla’s shares fell significantly due to increased AI spending, raising investor concerns.
– Despite losses, both companies reported substantial revenue growth from their core businesses.

Shares of Alphabet and Tesla fell significantly after both companies announced increased spending on artificial intelligence (AI), raising concerns among investors about rising costs.Tesla’s stock dropped 14.5%, marking its worst day since March 2025, while Alphabet’s shares decreased by 7.1%.

Stock plunge

Tesla lost approximately $200 billion in market capitalisation, while Alphabet saw a reduction of about $300 billion.

Both companies reported negative free cash flow for the second quarter.

Alphabet increased its capital expenditure forecast for the year to between $195 billion and $205 billion, up from an earlier projection of $180 billion to $190 billion.

Tesla’s capex surged 142% year on year to $5.79 billion, with expectations of over $25 billion in capex for the year.

Amazon also experienced losses, declining 4.6% and losing about $120 billion in value.

Management from both companies attempted to reassure investors regarding spending.

Musk expressed confidence in the future returns from ongoing investments, including semiconductor production and Tesla’s humanoid robot, Optimus.

Alphabet’s CFO indicated increased spending was due to a need for additional computing capacity to meet growing AI demand.

Investors have focused on the rise in capital expenditure and concerns over margin outlook.

Some positive results were reported, with Google Cloud revenue increasing 82% to $24.8 billion.

This marked one of the strongest growth quarters Alphabet has experienced in five years.

Positive signs

Porter, a portfolio manager, highlighted the revenue growth as indicative of strong performance due to Alphabet’s investments.

Tesla’s automotive business generated $20.52 billion in revenue, up 23% year on year.