Alphabet and Tesla shares plunge as runaway AI spending spooks investors

Shares of Alphabet and Tesla took a beating Thursday after the tech giants said they would ramp up their already breakneck pace of artificial intelligence spending – rattling investors who are increasingly wary of whether the massive bets will pay off.  Tesla shares fell 10% and Alphabet sank over 5%.The dismal trading day comes after Alphabet shares already closed 1.5% lower on Wednesday and Tesla closed down 1.3%.Both companies warned of massive run-ups in spending: Alphabet raised its capital expenditure forecast for this year to $195 billion to $205 billion and said those figures could balloon even higher next year.

The Google parent company previously projected capex between $180 billion and $190 billion.Tesla said its capex surged 142% in the second quarter to $5.79 billion from the prior yearly period.The company said it anticipates more than $25 billion in capex this year.At the same time investors have grown anxious about seemingly limitless AI spending, some companies have been hammered for not doing enough.

Last week, for instance, IBM’s stock suffered its worst trading day since 1968 after the company admitted it had “faltered” in its AI strategy.IBM CEO Arvind Krishna said the company “did not anticipate the magnitude of the capex reprioritization” that was happening across the tech industry.Top brass at both Tesla and Alphabet rushed to calm investor jitters about their nosebleed figures.“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, referring to capital expenditures, or spending.Musk – who’s greatly skilled at getting investors optimistic about his lofty spending ambitions on moonshot projects –  touted Tesla’s future initiatives like its Optimus humanoid robot and semiconductor production efforts.

Tesla is “installing the f...