DR Barton, principal at Woodshaw Financial Group, explains why he believes Alphabet’s increased capital spending on AI is a positive and believes the market pullback is an opportunity to buy Alphabet stock at Barney & Company.
Shares of the Magnificent 7 tech stocks fell this week on investor concerns about hyperscalers’ massive spending on artificial intelligence infrastructure amid global economic uncertainty due to the restart of the Iran war.
The so-called Magnificent Seven tech stocks suffered their biggest single-day decline in a year on Thursday, with Bloomberg reporting that the group’s index fell 4.8%, wiping out about $787 billion in market capitalization. This was the largest single-day decline since April 2025.
The report said that as of Thursday’s close, the Mag7 index had fallen about 11% from its all-time high in late May, wiping out about $2 trillion in market capitalization.
As of Friday morning, six of the MagSeven stocks had fallen in the past five trading days, with Tesla dropping more than 19%, as well as Google parent company Alphabet (-8.5%), Amazon (-6.3%), Meta (-6%), Microsoft (-1.3%) and Apple (-0.4%). In contrast, Nvidia stock has gained 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)
The decline in tech stocks further accelerated after Alphabet and Tesla released earnings reports after Wednesday’s trading, with both companies reporting significant capital spending this year.
Bloomberg reported that Alphabet announced plans to spend about $200 billion in capital spending this year, up from a previously expected $190 billion, and that increased spending on AI data centers and infrastructure helped the company improve its quarterly cash flow for the first time since Google went public.
“Alphabet’s expanded investment outlook supports our view that building AI infrastructure remains a persistent theme,” said Brian Therian, senior analyst at Edward Jones. “However, the negative reaction in stock prices may indicate that investors are becoming more focused 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 capital expenditures. (Richard Bode/Wireimage)
Amid soaring spending, Tesla’s profits fell well short of Wall Street analysts’ expectations, and CEO Elon Musk said on an earnings call that 2026 will be “the year of major capital spending.”The company should “make capital investments as soon as possible. We should invest as soon as we can without wasting money.”
The company’s spending is aimed at boosting its AI capabilities and increasing production of Optimus humanoid robots, robotaxis, and self-driving cars.
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| ticker | safety | last | change | change % |
|---|---|---|---|---|
| NVDA | NVIDIA Corporation | 206.84 | -1.92 |
-0.92% |
| AAPL | Apple Inc. | 333.02 | +11.36 |
+3.53% |
| MSFT | Microsoft Corporation | 381.70 | +0.12 |
+0.03% |
| Alphabet Co., Ltd. | 319.74 | +2.05 |
+0.65% |
|
| AMZN | Amazon.com Inc. | 232.11 | -1.55 |
-0.66% |
| meta | Meta Platforms Co., Ltd. | 595.19 | -10.91 |
-1.80% |
| TSLA | Tesla Inc. | 313.03 | -6.66 |
-2.08% |
“Tesla continues to invest heavily in AI and robotics, but monetization remains a top concern following weak profits,” Ryan Lee, Direxion’s senior vice president of products and strategy, said in a note.
“Tesla has the potential to become a physical AI story, bringing artificial intelligence into consumers’ daily lives through self-driving cars and robotics. The question is how quickly these investments start supporting valuations,” Lee added.
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