Woodshaw Financial Group principal DR Barton explains why Alphabets increasing CAPEX for AI is a good thing and sees market pullbacks as buying opportunities for Alphabet stock at Varney & Co.
Shares in Magnificent 7 tech stock fell this week amid investor concerns about hyperscalers' heavy spending on artificial intelligence infrastructure amid uncertainty over the global economy due to renewed tensions in the Iran war.
The so-called Magnificent Seven tech stocks fell the most in a single day in a year on Thursday, when Bloomberg reported that the group's index fell 4.8% and erased about 787 billion in market value – the biggest one-day decline since April 2025.
The report noted that as of late Thursday, the Mag Seven index is down about 11% from its record high reached in late May, and about $2 billion in the market has been wiped out.
As of Friday morning, six Mag Seven shares were down in the last five trading days, Tesla fell more than 19%, while shares in Google parent Alphabet (-8.5%), Amazon (-6.3%), Meta (-6%), Microsoft (-1.3%) and Apple (-0.4%) also fell. In contrast, Nvidia shares are up about 1.9% over the past five days.
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Traders work on the floor of the New York Stock Exchange (NYSE) in Lower Manhattan. (Michael Nagle/Bloomberg via Getty Images)
Tech stocks' slide intensified after Alphabet and Tesla released their earnings reports after Wednesday's trading session, with both companies reporting big spending this year.
Alphabet announced plans to spend about $200 billion this year, up from a previous estimate of $190 billion, with higher spending on AI data centers and infrastructure contributing to the company's first quarterly earnings turnaround since Google went public, according to a Bloomberg report.
“Alphabet's strong investment outlook helps reinforce our view that building AI infrastructure remains a long-term theme,” said Edward Jones senior analyst Brian Therien. “However, the negative share price reaction may indicate that investors are focusing more on the returns generated from AI-related investments.”
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Tesla CEO Elon Musk said the company needs to spend as much money as possible on spending without wasting money. (Richard Bord/WireImage)
Tesla's profit came in below Wall Street analysts' estimates amid rising costs, with CEO Elon Musk calling the company's earnings call that 2026 would be a “big capex year” and that the company “must spend on capex as quickly as possible — spend as quickly as possible without it getting worse.”
The company's spending is aimed at improving its AI capabilities and improving the production of Optimus humanoid robots, as well as robotaxis and autonomous vehicles.
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| A ticker | Security | Finally | Change | Change % |
|---|---|---|---|---|
| NVDA | The company NVIDIA CORP. | 208.76 | -3.30 |
-1.56% |
| AAPL | Company APPLE INC. | 321.66 | -4.23 |
-1.30% |
| MSFT | MICROSOFT CORP. | 381.58 | -8.76 |
-2.24% |
| GOOGL | Company ALPHABET INC. | 317.69 | -24.40 |
-7.13% |
| AMZN | Company AMAZON.COM INC. | 233.66 | -11.19 |
-4.57% |
| META | META PLATFORMS INC. | 606.10 | -21.07 |
-3.36% |
| TSLA | Company TESLA INC. | 319.69 | -54.32 |
-14.52% |
Ryan Lee, senior vice president of product and strategy at Direxion, said in a letter, “While Tesla continues to invest heavily in AI and robotics, monetization remains a major concern following the earnings miss.”
“Tesla has become a real AI story, with the ability to bring artificial intelligence to the daily life of consumers through autonomous vehicles and robots. The question is how those funds can begin to support the measurement,” Lee added.
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