Google and Tesla shares plunge as AI spending rattles markets - BBC

What the report says

BBC News reported that shares in Google parent Alphabet and Tesla fell sharply on Thursday after both companies disclosed negative free cash flow and signaled further heavy investment, particularly linked to artificial intelligence. Alphabet’s stock dropped nearly 7%, while Tesla’s fell 14.5%, reflecting investor concern over how soon large technology spending will translate into returns.

According to the BBC, Alphabet reported quarterly revenue of $119.8bn, up 23% from a year earlier, but free cash flow turned negative at $5.9bn. The report said this was the first time the metric had fallen below zero since Google became a public company in 2004. Alphabet now expects capital spending of up to $205bn this year, $15bn above an estimate issued three months earlier, largely for AI-related infrastructure.

Google finance chief Anat Ashkanazi told analysts that rising capital expenditure, mostly tied to AI, drove the negative cash figure. The company spent $45bn in the second quarter, with most of that directed toward servers and the rest toward data centres, the BBC reported. Chief executive Sundar Pichai framed AI as an early-stage shift with significant potential, while analysts cited in the report said investors remain wary about whether the spending will produce matching returns.

Tesla also reported negative free cash flow, at $1.1bn for the second quarter, its first such result in two years, according to the BBC’s review of company records. The electric vehicle maker expects to spend up to $25bn this year on unspecified projects, and finance chief Vaibhav Taneja said the company is in a major investment cycle that could intensify over the next three years.