Dan Ives, managing director at Wedbush Securities, argues that the surge in artificial intelligence spending remains in its infancy. He challenged the sharp selloff in Tesla and Alphabet shares that followed recent earnings reports.
Speaking on CNBC's "Power Lunch," Ives highlighted that both companies exceeded revenue expectations but faced investor backlash due to increased capital expenditures on AI development.
Only a Fraction of the AI Spending Journey Completed
Tesla's stock plummeted 14.5% on Thursday while Alphabet shares declined nearly 7%. This happened despite Google Cloud revenue soaring 82% to $24.8 billion. Ives emphasized that this downturn stems from timing rather than valuation concerns, stating, "This is an arms race that's playing out and we're only 15% of the way through." He compared the current AI spending by hyperscalers to the early construction phase of the Las Vegas Strip, where the infrastructure preceded the payoff.
Investor Patience Tested but Thesis Intact
Regarding Tesla, Ives acknowledged that patience among investors is thinning since AI initiatives like autonomous driving and Optimus robotics have yet to deliver immediate returns. He described Tesla’s capital expenditures as a "gut check moment" rather than a reason to abandon the stock’s long-term potential. also Ives touched on Elon Musk’s corporate strategy, suggesting there is over an 80% chance that SpaceX could eventually acquire Tesla, a view more optimistic than the market's current 69% merger probability priced in Kalshi’s prediction market.
Intel also released earnings the same evening, setting the stage for upcoming Big Tech reports that will test whether demand aligns with Ives’ optimistic "early innings" perspective or the market’s growing skepticism.
Tesla shares slid 14.5% and Alphabet declined 7% in response to the earnings and spending news.
