Alphabet shares slid roughly 7% on Tuesday after the company disclosed a $94.1 billion SpaceX position in its quarterly filing, even as second-quarter revenue came in at $119.8 billion, up 24% year over year and above analyst expectations.

The SpaceX holding surfaced for the first time as a marked-to-market figure following SpaceX's June 12 public listing, when shares priced at $135 and the company opened at a valuation near $1.77 trillion. Of the $94.1 billion stake, $80 billion remains under short-term sale restrictions, and another $14.1 billion is locked up through the third quarter of 2027. Google first bought into SpaceX back in 2015 alongside Fidelity, originally to back satellite internet infrastructure, long before Starlink or Starship became household names.

Spending, not revenue, spooked the market

The selloff had less to do with the SpaceX disclosure and more to do with what Alphabet is burning through to stay competitive in AI. The company spent roughly $45 billion on infrastructure in the quarter alone, pushing free cash flow to negative $5.9 billion. That is the first negative free cash flow quarter Alphabet has recorded since tracking began in 2003. Management also lifted full-year 2026 capital expenditure guidance to a range of $195 billion to $205 billion, citing data center buildouts, AI chips, and third-party server leases needed while internal capacity catches up to demand.

As Alphabet noted in its filing, the company is leasing external compute at elevated cost to meet near-term AI workload demand, which is squeezing margins in the short run. The pressure is visible across the income statement even as individual business lines post strong numbers: Google Cloud revenue surged 82% to $24.8 billion, cloud operating income hit $8.8 billion, and YouTube advertising brought in $11.06 billion, up 13%.

The scale of AI infrastructure investment at Alphabet mirrors the broader race among hyperscalers. Cloud infrastructure purpose-built for AI agents is attracting capital at every tier of the market, from startups to the largest tech companies on earth. The appetite for compute is not slowing.

This article is for informational purposes only and does not constitute financial advice or an investment recommendation.