Tesla Selloff Explained: Profit Pressure, Rising AI Costs and What's Next

Tesla shares plunged nearly 14% after weaker-than-expected second-quarter earnings, with EPS falling short of forecasts, operating profit declining sharply, and the company reporting negative free cash flow for the first time in over two years. Aggressive spending on AI, autonomous driving, Robotaxi and the Optimus humanoid robot raised margin concerns among investors, with management offering no clear timelines for returns. The selloff dragged broader technology stocks lower, pushing the Nasdaq down more than 2% and erasing hundreds of billions from the Magnificent Seven's combined market value.