By Rajwa Quasim
Alphabet stocks fell sharply on Thursday after its latest earning reports showed that spending big on artificial intelligence is starting to worry investors.
Alphabet, Google’s parent company fell around 4% early Thursday. Its Q2 revenue reached $119 billion, up 24% compared to the previous year, and its cloud computing division jumped an impressive 82%, amounting to $24.8 billion.
READ: Alphabet faces investor scrutiny as Gemini delay tests AI spending (July 21, 2026)
Google’s Gemini platform has over 950 million monthly users now. The company has signaled higher spending in artificial intelligence, forecast for this year is $195 billion to $205 billion and it could even go higher in 2027. The company’s previous projection was between $180 billion and $190 billion.
Alphabet’s CEO Sundar Pichai, said the spending increase “is primarily due to an acceleration in the delivery of capacity to meet growing demand.” The tech giant has maintained that it does not have enough computing capacity to meet the AI demand that it is seeing.
Alphabet CFO Anay Ashkanazi said that about 60% of the quarter’s spending went towards servers with the remaining 40% going toward building the data centers and related infrastructure.
READ: Alphabet plans $80 billion stock sale for AI buildout (June 2, 2026)
Cantor Fitzgerald lowered its Alphabet stock price target to $420 from $435, keeping an Overweight rating, citing a strong quarter with Google Cloud Platform outperforming and expanding margins, offset by higher AI infrastructure spending and limited EBIT upside. Meanwhile, Raymond James cut its GOOG price target to $400 from $425 while maintaining Strong Buy, calling results largely in line, with YouTube and Cloud outperforming and Search slightly weaker. The firm’s focus shifts to Gemini 4 performance and future model development. The pattern is telling: trimmed targets, maintained bullish ratings.
Even Tesla stock fell 12% due to higher spending in AI. Tesla is investing in robotics and semiconductors. Tesla’s capex surged 142% year-on-year in the Q2 to $5.79 billion. “This is a massive capex year. I’m confident that all the things that we’re investing in will yield incredible returns. Really, maybe the best capex returns that we’ve ever seen,” Tesla CEO Elon Musk said on the earnings call on Wednesday.
Meta Platforms stock is down 3% to $610.30, and Snap stock is off 1% to $4.43.