Ives said that while higher AI infrastructure spending may weigh on margins in the near term, accelerating adoption of AI by both enterprises and consumers will be a key theme of second-quarter earnings.
- Earlier, Munster struck a similar tone, saying the higher capital expenditure outlooks from Alphabet and Tesla reinforce the broader AI infrastructure story.
- Although increased spending has pressured margins, he believes the industry remains in the early stages of the AI investment cycle.
- Munster added that the rising capex estimates of both Alphabet and Tesla are beneficial to the AI investment trade.
Tech strategist Dan Ives said that the AI capital expenditure boom remains “full steam ahead” after the latest quarterly results from Tesla Inc. (TSLA) and Alphabet Inc. (GOOG, GOOGL).
“AI Revolution Capex narrative continues full steam ahead as evidenced last night again by Alphabet and Tesla,” Ives said in a post on X.
Deepwater Asset Management’s Gene Munster echoed similar sentiments earlier, saying that the AI infrastructure trade remains intact and that the tech industry is still in the “3rd inning” of the AI investment cycle.
Tesla shares were down more than 6% in Thursday’s pre-market trade, while Alphabet’s Class A shares were down about 5%. Both TSLA and GOOGL were among the top trending tickers on Stocktwits at the time of writing.
Why Ives And Munster Remain Bullish On AI Spending
Ives said that while higher AI infrastructure spending may weigh on margins in the near term, accelerating adoption of AI by both enterprises and consumers will be a key theme of second-quarter (Q2) earnings. He added that while this may test investor patience, capex will drive the future.
Munster struck a similar tone, saying the higher capital expenditure outlooks from Alphabet and Tesla reinforce the broader AI infrastructure story. Although increased spending has pressured margins, he believes the industry remains in the early stages of the AI investment cycle.
“The infrastructure trade is intact based on higher capex outlooks and margins have been under pressure. Overall, I still believe we’re in the 3rd inning,” he said.
Munster added that the rising capex estimates of both Alphabet and Tesla are beneficial to the AI investment trade. Following their earnings, Munster believes that the expectations from Microsoft Corp. (MSFT), Amazon.com Inc. (AMZN), and Meta Platforms Inc. (META) have gone up with respect to capex.
“They all kind of have to stay paced with each other to make sure they don’t miss what’s going,” he said, while highlighting that this investment in their businesses is going to place downward pressure on profitability in the near term.
Munster also noted that investors will want to know that while margins may not rise in the near term, they will need assurance that margins will eventually rise or be sustainably higher over the longer term for them to fully embrace these stocks.
Musk Says TSLA Should Be Spending on Capex ‘As Fast As We Can’
During a post-earnings call with analysts, Tesla CEO Elon Musk said that the company should be spending on capex as fast as it can.
“We should be spending on capex as fast as we can spend… as fast as we can without it being too wasteful. So we’re not trying to aim for some extremely high-efficiency capital spend because that would slow things down,” he said.
Tesla CFO Vaibhav Taneja said that the company’s capex would be “more than $25 billion” in 2026, with the EV giant reporting negative cash flow of $1.1 billion during the second quarter (Q2), its first such shortfall since 2024.
Alphabet also expects an increase in capex during the current fiscal, raising its forecast to $195 billion to $205 billion, up from $180 billion to $190 billion that it forecast during the first quarter (Q1).
What Retail Traders Think Of TSLA, GOOGL Stocks
Retail sentiment on Stocktwits around Tesla trended in the ‘neutral’ territory at the time of writing, while traders felt ‘extremely bullish’ about Alphabet.
TSLA stock is down 17% year-to-date, while GOOGL stock is up 9%. The S&P 500 ETF (SPY) is up 19% over the past 12 months, while the Invesco QQQ Trust (QQQ) is up 26%.
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