Wall Street Analyst Says AI Spending Arms Race Is at 15% After Tesla and Google Selloff

Wedbush Securities managing director Dan Ives says the artificial intelligence spending buildout is still in its early stages. He pushed back against Thursday’s selloff in Tesla and Alphabet shares.

Ives made the case on CNBC’s “Power Lunch.” Both companies had just posted revenue beats, yet investors punished them for heavier AI capital spending.

“Only 15% of the Way Through”

Ives called the pullback a timing problem, not a valuation problem. Tesla (TSLA) stock fell 14.5% Thursday. Alphabet (GOOGL) slid nearly 7%, even though Google Cloud revenue jumped 82% to $24.8 billion. Ives said:

“This is an arms race that’s playing out and we’re only 15% of the way through.”

He likened the hyperscalers’ spending to early Las Vegas Strip construction. The buildings came first, he argued, and the payoff followed later. That framing runs counter to growing AI bubble fears elsewhere in tech.

Patience Wearing Thin, Not Broken

On Tesla specifically, Ives said investor patience is fading. The AI story, autonomous driving, and Optimus robotics haven’t delivered near-term payoff yet. He called Tesla’s capex spending a “gut check moment” rather than grounds to abandon the thesis.

Ives also weighed in on Musk’s broader corporate structure. He estimates better-than-80% odds that SpaceX eventually acquires Tesla, running ahead of the market. Kalshi’s prediction market currently prices around a 69% chance of a merger before 2028.

Intel reported earnings the same evening. Ives’ framing sets up a real test for next week’s Big Tech reports. Investors will find out soon whether demand data backs his “early innings” call or the market’s more skeptical read wins out.