Alphabet and Tesla test Wall Street's patience as AI spending overshadows growth

(L-R) Google CEO Sundar Pichai speaks and Tesla and SpaceX CEO Elon Musk arrive for the inauguration ceremony before Donald Trump is sworn in as the 47th US President in the US Capitol Rotunda in Washington, DC, on Jan. 20, 2025. Saul Loeb | Via ReutersWhen Alphabet and Tesla kicked off tech earnings season on Wednesday, one theme became immediately clear: AI spending is under a microscope. Both companies reported negative free cash flow for the latest quarter and told investors to prepare for higher capital expenditures. They both also reported better-than-expected revenue, but that wasn't enough to prevent an after-market selloff, with Tesla shares sliding 4% and Alphabet down more than 3%. It's a potentially ominous sign for the tech industry, particularly the other megacaps, which are mostly set to report quarterly results next week. Meta and Microsoft are scheduled to report next Wednesday, followed a day later by Amazon and Apple. Much of the AI boom to date has been fueled by historic levels of infrastructure spending among a small crop of companies, including hefty investments into model developers OpenAI and Anthropic. But the recent emergence of cheaper open-source models...