Amid a drop of more than 6% in Alphabet 's stock on Thursday, July 23, due to the company's spending on artificial intelligence (AI) infrastructure, investors discovered that the company is also having to deal with the consequences of the devaluation of SpaceX 's stock.
That's because Alphabet held a stake of approximately US$94.1 billion in Elon Musk 's rocket, satellite telecommunications, and AI company at the end of the second quarter, as reported in documents filed with the Securities and Exchange Commission (SEC, the US equivalent of the CVM) on the same Thursday, the 23rd.
This stake is equivalent to approximately 4% of SpaceX's share capital, or about 550 million shares, according to calculations by Barron's website. After an initial positive period, Alphabet saw the value of this investment shrink.
According to Barron's , since the end of the second quarter, SpaceX shares have fallen by about 34%, reducing the value of that stake to approximately US$62 billion. As a result, Alphabet has lost about US$32 billion in value associated with the investment.
The loss, although in the billions, does not represent a major problem for Alphabet, considering that it is equivalent to less than 1% of its market value, currently around US$3.9 trillion.
Furthermore, Alphabet has made significant gains from this investment. An early backer of SpaceX, the company has seen its stake in the rocket manufacturer boost its results in recent quarters as the company's value has increased.
In the second quarter, Alphabet reported a gain of $98 billion from the appreciation of its investments in other companies. Among the companies in its portfolio is Anthropic . Alphabet has committed to investing up to $40 billion in the AI startup founded by Dario Amodei .
More than SpaceX, what worries Alphabet investors is the announced spending on AI. The company plans to invest around US$200 billion to expand its business in this area by 2026, an increase from the projection released in April of approximately US$185 billion.
Another point that negatively impacted investors was the fact that the company's quarterly cash flow was negative for the first time since its IPO more than two decades ago, according to data compiled by Bloomberg . The quarter ended with a negative cash flow of US$5.9 billion.
These news items caused Alphabet's shares to fall 6.82% around 5 PM, to US$318.59. Even so, the shares are up 0.97% for the year.
But the change in mood isn't limited to Alphabet. Market sentiment toward the technology sector has shifted amid increasing questions about the AI investment cycle. After months of relegating this concern to the back burner, investors have returned to questioning when these expenditures will begin to translate into profit and cash generation .
In the case of SpaceX, in addition to concerns related to AI, the stock has recently been pressured by factors such as high valuation and profit-taking after the IPO. Since the IPO, the shares have fallen by 28%, reducing the company's market value to US$1.54 trillion.
