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Just like Klaus carried The Vampire Diaries, the Mag 7 is essentially carrying the whole S&P 500 on its back right now—which makes its Q2 earning announcements higher stakes than ever.
Alphabet and Tesla kicked things off late yesterday, reporting right after the bell. As predicted, all roads lead back to two key, tricky themes: politics and AI.
Driving downhill
Tesla had a tough quarter, and not just because the cloud of Elon Musk’s political fallout with President Trump is still hanging over the company.
Shares sank 8.2% today after the EV company reported that auto sales fell 16%, the second straight quarter the metric has declined and Tesla's worst quarterly sales drop in over a decade. The company pointed to headwinds like cutthroat competition from China, but promised a cheaper car was on its way later this year to eventually boost sales.
Perhaps even more concerning to investors was Musk’s warning that Tesla’s losing streak could continue for “a few rough quarters” due to the expiration of federal EV credits in the big, beautiful bill that was just passed by Congress.
Tesla, which is the worst performing member of the Magnificent Seven, has declined 24.4% year to date.
Analysts and investors have been begging Musk to get back to his desk and abandon his political aspirations for months. “If Musk continues to lead and remain in the driver’s seat at this pace, we believe Tesla is on a path to an accelerated growth path over the coming years with deliveries expected to ramp in the back-half of 2025 following the Model Y refresh cycle,” wrote Tesla bull Dan Ives yesterday.
Alphabet spells “AI”
Shares of Google parent company Alphabet rose 1.02% after beating top and bottom line expectations. The search giant also upped its capital expenditures forecast by $10 billion, and now plans to shell out $85 billion this year—not too shabby.
Investors have closely scrutinized big tech’s capex spending, which largely goes toward building and powering cost-intensive data centers. Companies like Alphabet are banking on surging demand for AI to justify the huge sums, and there's no sign of a slowdown: Management said on the earnings call it will likely increase its capex spending in 2026.
Another surprising bright spot was the company’s search business revenue, which rose 12% year over year, despite a surge of AI-driven chatbots that have fiercely competed with Google. Its “AI overview” product now has two billion monthly users, a sharp increase from the 1.5 billion last quarter, management noted.—LB