Tesla’s Stock Down 32.6% as AI Spending Hits Free Cash Flow
TSLA•Tesla shares have plunged 32.6% from their 52-week high since mid-May, the steepest drop among the Magnificent Seven. Wall Street’s concern over a 70% surge in AI infrastructure spending to over $700 billion this year forecasts a sharp pullback in Tesla’s forward free cash flow.
1. Recent Magnificent Seven Declines
Since mid-May, the Magnificent Seven index is down over 13%, with Tesla falling 32.6% from its 52-week high, the largest drop in the group. This performance contrasts with a roughly 2% decline in both the Invesco QQQ Trust and the S&P 500 over the same period.
2. Surging AI Infrastructure Spending
Capital expenditures on AI-related data centers and high-end GPUs are projected to rise by 70% to exceed $700 billion this year, stretching corporate cash reserves. Investors are increasingly wary that this aggressive build-out will weigh on future cash generation.
3. Impact on Tesla’s Free Cash Flow and Earnings
Tesla’s 12-month forward free cash flow is expected to tumble sharply from its 2024 peak as AI investments ramp up. With concerns over higher financing costs if the Federal Reserve raises rates later this year, investors are bracing for a critical second-quarter earnings report to validate long-term returns.
