Google · Tesla · Elon Musk · Wall Street · OpenAI · Anthropic · CNBC Technology
It's a potentially ominous sign for the tech industry, particularly the other megacaps
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Much of the AI boom to date has been fueled by historic levels of infrastructure spending among a small crop of companies, including hefty investments into model developers OpenAI and Anthropic.
Key facts
- Google's parent company forecast capex for this year of $195 billion to $205 billion and warned of higher numbers in 2027
- Free cash flow at Tesla turned negative in the quarter, with a deficit of $1.1 billion after the company generated $146 million in free cash flow a year ago and $1.44 billion in the first quarter
- Prior guidance was for spending of $180 billion to $190 billion
- The numbers at Alphabet were even more stark, with free cash flow sinking to negative $5.9 billion after the company, which is lauded for its fat margins from online ads, generated almost $25 billion
Summary
When Alphabet and Tesla kicked off tech earnings season on Wednesday, one theme became immediately clear: AI spending is under a microscope. Both companies reported negative free cash flow for the latest quarter and told investors to prepare for higher capital expenditures. It's a potentially ominous sign for the tech industry, particularly the other megacaps, which are mostly set to report quarterly results next week. Heading into Wednesday's reports, Alphabet's stock was already on pace for its third straight monthly decline after surging in April, while Tesla shares were down 11% in July and 17% for the year.