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NEW YORK — Shares of Alphabet and Tesla fell sharply in U.S. premarket trading on Thursday after both companies signaled significantly higher capital spending on artificial intelligence, intensifying investor concerns about cash burn and negative free cash flow. Alphabet’s stock declined about 4 percent after the company lifted its 2024 capital expenditure outlook to a range of $195 billion to $205 billion from a prior forecast of $180 billion to $190 billion, and warned that spending would increase further by 2027 to relieve a shortage of computing capacity relative to rapidly growing client demand for AI services. Tesla dropped more than 5 percent as it reported that second-quarter capital expenditure surged 142 percent year-on-year to $5.79 billion and said full-year spending was expected to exceed $25 billion, contributing to negative free cash flow for the quarter. SAN FRANCISCO — Executives at both companies used their earnings calls to reassure markets that the heavy investment cycle reflects long-term strategic plans rather than a shift in financial discipline. Tesla Chief Executive Elon Musk said the company was in a massive investment phase that he expects will ultimately deliver strong capital returns, citing large commitments to in-house semiconductor production and the Optimus humanoid robot program, for which first-generation assembly lines are now being installed. Alphabet emphasized that its expanded capex will support rapidly scaling AI infrastructure, while pointing to robust growth in Google Cloud, where revenue rose 82 percent to $24.8 billion. Tesla reported that its core automotive business generated $20.52 billion in revenue, up 23 percent from a year earlier, but the premarket selloff underscored Wall Street’s focus on short-term cash flow as AI-related capital requirements accelerate.

By Emily Rhodes | JQJO News