Tesla falls 15%, Alphabet drops 8% as AI spending concerns mount

Tesla shares plunged 15% to about $319 after reporting weaker-than-expected quarterly earnings with adjusted EPS of 33 cents versus consensus estimates of 51 cents, negative free cash flow of $1.09 billion, and capital expenditure of $5.8 billion (up 142% year-on-year), its first quarterly cash burn in two years. Alphabet fell 8% despite beating revenue and profit estimates, as investors focused on its sharply higher 2026 capex guidance of $205 billion, up from $180-190 billion earlier, with management signalling further increases in 2027. The declines dragged the S&P 500 down 1.55% and heightened concerns across global technology stocks about whether massive AI infrastructure spending by the Magnificent Seven, collectively estimated at $725 billion this year, will generate adequate returns.