Alphabet, Tesla earnings spark global selloff over AI spending

Alphabet ↘ 3.58% and Tesla ↗ 0.32% delivered a one-two punch to technology stocks this week after both companies reported second-quarter earnings that spooked investors with ballooning AI spending and a sharp profit miss, triggering a broad sell-off across global markets.

Wall Street Reacts to AI Spending Surge

Tesla shares plunged roughly 14% on Thursday, while Alphabet fell nearly 7% following their Wednesday evening earnings reports. Both companies beat revenue expectations but alarmed investors with the scale of their capital expenditure plans and deteriorating cash flows.financialcontent+1

Alphabet reported revenue of $119.8 billion, up 24% year over year, and earnings per share of $9.11. But the company raised its full-year 2026 capital expenditure guidance to between $195 billion and $205 billion, up from its prior forecast of $180 billion to $190 billion, as it races to build out AI infrastructure. Free cash flow swung to negative $5.9 billion, a reversal from nearly $25 billion generated a year earlier.cnbc+6

Tesla reported revenue of $28.24 billion, up 26%, surpassing expectations, but adjusted earnings of $0.33 per share fell well short of the $0.50 Wall Street had forecast. Free cash flow turned negative for the first time since early 2024, with the company burning more than $1 billion as capital expenditures more than doubled to nearly $6 billion. The company reiterated plans to spend more than $25 billion on capex this year, up from $8.5 billion in 2025.finance.yahoo+1

Tesla stock fell to its lowest level in nearly a year and has now lost roughly 28% since the start of 2026, making it the worst performer among the Magnificent Seven, according to Investopedia.investopedia

Sell-Off Spreads to Asia

The damage rippled into South Korea on Thursday, where the Kospi fell to 6,706 points on July 24. Samsung Electronics dropped 7.59% and SK Hynix fell 8.29%, according to Trading Economics data. The two chipmakers account for roughly half the index's weighting and have been among the most sensitive stocks globally to shifts in AI spending sentiment.instagram+1

A Busy Week Ahead

The results from Alphabet and Tesla — the first two Magnificent Seven members to report this earnings season — set an uneasy tone ahead of what promises to be a pivotal week. Microsoft ↗ 0.52%, Meta ↗ 1.02%, Amazon Amazon.com, Inc. ↘ 2.24%, and Apple ↘ 0.80% are all scheduled to report in the coming days, with investors now on high alert for further capex escalation.

Nvidia ↘ 1.47% shares also came under pressure alongside the broader group on Thursday. The Roundhill Magnificent Seven ETF is up just 1% this year, lagging the S&P 500's roughly 9% gain, according to Business Insider. Citi strategists recently declared "the Mag 7 is dead as a construct for assessing large-cap growth dynamics" — and this week's results appear to underscore why.businessinsider