Tesla and Alphabet Shed Hundreds of Billions in Value After Earnings Spook Wall Street

Two of the most valuable companies in the world shed hundreds of billions of dollars in combined market value on Wednesday, as investors recoiled at the soaring cost of the artificial-intelligence boom and punished Tesla for a rare profit miss.

Alphabet, Google's parent, delivered what by most measures was a blockbuster quarter. Revenue rose to $119.8 billion, topping analysts' expectations of $117.0 billion, while earnings came in at $2.26 a share against a $2.24 consensus. Google Cloud revenue surged 82% to $24.8 billion, and the company posted a record quarterly profit, padded by roughly $99 billion in gains on equity stakes in firms including Anthropic and SpaceX.

Yet the market fixated on a single number. Alphabet raised its capital-expenditure forecast for the year to between $195 billion and $205 billion and warned that spending would climb higher still in 2027, as it races to build the data centers and chips needed to power AI. The disclosure wiped out about $300 billion in market capitalization in a single session, a stark sign that Wall Street's patience with open-ended AI outlays is wearing thin.

Tesla fared worse in percentage terms, with shares tumbling about 14%. The electric-vehicle maker beat on the top line, reporting revenue of $28.24 billion, up 26% from a year earlier, and record deliveries of 480,126 vehicles — its first annual growth in two years. But adjusted earnings of 33 cents a share fell short of forecasts as lower vehicle prices, shrinking regulatory-credit sales and rising costs squeezed margins. Both companies reported negative free cash flow for the quarter.

Chief Executive Elon Musk sought to redirect attention to Tesla's next act, telling analysts that the first production lines for the company's Optimus humanoid robot are being installed at Gigafactory Texas, with first-generation units expected to roll off the line later this year. Musk has long argued that robotics and autonomy, not car sales, will ultimately define Tesla's valuation.

Analysts were quick to note the irony that Alphabet was punished for a quarter many rivals would envy, a sign of just how nervous the market has become about the AI arms race. Some argued the reaction was overdone, pointing to Google Cloud's surging growth and the strategic value of its stakes in Anthropic and SpaceX; others countered that ever-rising capital budgets could weigh on free cash flow for years before paying off.

The twin sell-offs rippled through the broader market and revived a nagging question hanging over the megacap technology rally: whether the tens of billions being poured into AI infrastructure will generate returns fast enough to justify the price. For now, investors signaled they want to see profits, not just promises.