Tesla and Google’s AI splurge sparks tech sell-off

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Tesla and Google’s AI splurge sparks tech sell-off James Titcomb Thu, 23 July 2026 at 12:59 pm GMT-4 2 min read Technology giants suffered a brutal sell-off on Thursday after heavy AI spending by Tesla and Google spooked investors. Elon Musk's Tesla suffered one of its biggest ever share price drops, falling by more than 12pc after the company's profits were hit by investments in AI. Google's parent company, Alphabet, dropped by almost 7pc after it burned through billions in cash to fund its own AI spending. A surging oil price that raised the prospect of interest-rate hikes added fuel to the fire, prompting the Nasdaq composite, a basket of tech shares, to plunge 2.6pc in its worst day for almost two months. Investors have become nervous about heavy spending on AI as the technology is yet to generate reliable profits. Concerns have been heightened by the recent launch of Kimi K3 , a cheaper Chinese AI that could rival US models. News of Google and Tesla's spending led to sell-offs at Amazon, Meta, Microsoft and Oracle, which are all making substantial AI investments. Tesla revealed a fall in profits on Wednesday night despite the company selling more cars than a year ago. Although revenues rose, substantial discounts on its cars ate into profit margins. The company also made less money from regulatory credits, which the electric-car maker sells to other manufacturers that fail to hit emissions targets. Donald Trump has cancelled electric-car subsidies and dismantled the regime that allowed Tesla to sell emissions credits. As its electric-vehicle business comes under pressure, the company is spending billions on expanding production of its driverless Cybercab and Optimus robots, as well as grid batteries and solar panels. "This is the fastest industrial scale-up since World War II in America," Mr Musk told analysts. Mr Musk became the world's first trillionaire after his rocket company SpaceX went public earlier this year , but the company's shares have since slumped. He has a 30pc stake in Tesla, which declined in value by more than $50bn (£37.5bn) on Thursday. Meanwhile, Google's parent company Alphabet warned investors that it could spend more than $200bn on AI this year, the second time it has raised forecasts. Anat Ashkenazi, its chief financial officer, told investors that capital expenditure would be between $195bn and $205bn this year. Much of it will be spent on AI data centres and the chips that run AI applications. This was up from a prior estimate of $180bn to $190bn, which itself was an increase on an earlier forecast of $175bn to $185bn. Ms Ashkenazi said the increase was to meet growing demand and that spending would jump again next year. The company burned through $5.9bn of cash during the three months to June – the first time that cash flow had been negative in Google's two decades as a public company.

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The Nasdaq plunged 2.6% as tech-focused selling emerged due to concerns over massive AI investments and cash burn by Tesla and Google. Tesla shares plummeted over 12% due to deteriorating profitability and subsidy repeals, while Alphabet also fell 7%. As rising crude oil prices compounded concerns over interest rate hikes, investors should remain cautious of short-term volatility in tech stocks.

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