The large US technology companies fall in the pre-opening of Wall Street this Thursday, pressured by the notable declines in Alphabet and teslawhich dropped 3% and 5%, respectively, after publishing results that have made little to alleviate the major concerns of investors on the health of the market artificial intelligence (AI). The point is that the figures from both companies have been quite compliant. Alphabet, for example, has multiplied its profit by four and has exceeded all objectives that marked the market. In addition, its revenue and operating profit improved and sales of its cloud business (Google Cloud) soared by 82% (compared to 62% in the first quarter). Less favorable were Tesla’s accounts, whose revenues amounted to $28.24 billion, exceeding forecasts of $25.71 billion. However, Earnings per share (EPS) clearly fell short of expectationsstanding at $0.33, compared to the $0.51 expected by consensus. The gross margin also decreased (16.8% compared to 17.2% a year ago and the expected 19.4%) due to both the decrease in the average sales price of vehicles and the lower contribution of income from regulatory credits. However, the market’s great concern is the usual one: AI spending. And the Google parent company announced that increased its annual AI spending forecast by $15 billion, to a range of $195-205 billion. The company explained that it has increased its investment estimate due to the growing demand for its artificial intelligence services, forcing it to accelerate its expansion plans, and stated that it will only continue to invest as long as the profitability of those investments is attractive.
All this, while its free cash flow became negative. «In other words, the company has already consumed its cash and the additional expense will have to be financed by issuing debt and shares»says Ipek Ozkardeskaya, senior analyst at Swissquote Bank. The problem, of course, is that rising interest rate expectations make that outlook «much less attractive to investors». Thus, despite an 82% growth in Cloud revenues, a figure that just a year ago would have excited the market, Alphabet shares have turned red. «This may lead some investors to wonder to what extent Google’s traditional business will be able to finance its enormous commitment to artificial intelligence«, highlights Kathleen Brooks, senior analyst at XTB. This expert also warns that the company warned that Third quarter comparisons with those of the previous year «may not be as favorabledue to the strong growth recorded in the third quarter of 2025. «The immediate market reaction to Alphabet’s results sets the tone for the next publications of the big technology companies: investors are paying increasing attention to the rising cost of AI ambitions than to the positive surprises in income,» says Ozkardeskaya. And investors, he continues, «They don’t want to see more spending, even if that spending drives sales. and help prevent a company like Alphabet from being left behind in the AI race.» «Perhaps big tech sees this situation as short-term pain in exchange for long-term benefits,» adds Ozkardeskaya. However, this expert believes that the winner of this trend will be the chip and semiconductor manufacturers, since that money «will end up reaching their pockets.» «Looking at the bigger picture, it seems that much of the fear that currently exists around the semiconductor sector could be exaggerated,» reflects Brooks, «Therefore, even if Google shares remain weak this week, we could see a strong rebound in chip companies, which would also boost the main US stock indices heading into the end of the week.»
THE TESLA PROBLEM
For its part, Tesla reported that the company plans invest around between 25,000 and 26,000 million dollars in AI infrastructure, robotaxis, Optimus –su humanoid robot– and own chips. If its results are added to this announcement, Brooks points out, it produces a perfect cocktail to scare away investors. And, although Tesla registered a record of vehicle deliveries during the quarterachieved that goal reducing the prices of Model 3 and Model Y. At the same time, operating expenses have risen sharply as the company continues to ramp up production of its Robotaxi. Likewise, bringing Optimus to the production phase represents an important advance, there is still «a very long way» before turning it into a successful commercial product. All this is causing the company continue burning cash and, although revenue from subscriptions related to its autonomous driving technology increased by 56%, free cash flow was negative again in the last quarter: the electric vehicle maker went from generating $1.44 billion of free cash flow in the previous quarter to recording a deficit of 1.1 billion dollars.
«Elon Musk’s vision for Tesla’s future requires huge amounts of capitaland investors are starting to lose patience,» says Brooks, who highlights that, furthermore, these results come after an especially complicated month for Tesla and SpaceX. Tesla shares have fallen 18% so far this year, while SpaceX has lost 26% over the last month. «Since we also SpaceX likely to continue burning through cash this yearinvestors are beginning to grow colder toward Musk’s companies as legitimate doubts arise about the strength of their balance sheets,» he says. «The fact that investors sold off both Alphabet and Tesla shares after the release of their results suggests that the investment narrative linked to artificial intelligence continues to rest on still fragile foundations«.
