The earnings season for “Magnificent 7” has started on a sour note with both Alphabet (GOOG) (GOOGL) and Tesla (TSLA) plunging following their respective confessionals, with the latter crashing over 14% on Thursday, July 23, and fell again on Friday. Both companies beat on revenues while missing on the bottom line, and as has been a recurring theme on tech companies’ earnings calls over the last couple of years, both bumped up their capex budgets.
While the ever-growing capex is music to the ears of chip, memory, and other artificial intelligence (AI) infrastructure plays, they have drained tech companies’ coffers. Far from generating the stellar free cash flows that they then splurged on repurchases, tech giants are now on a capital-raising spree to fund their burgeoning investments, which at least a section of the market believes will never generate commensurate returns.
