There's a fear in investing when a sector swells rapidly. Booming stock prices and aggressive spending feel great, until things inevitably cool off. Then comes the reckoning: Who overdid it in irreversible ways?
Big Tech is in an AI arms race, each company trying to outspend the others on data centers, GPUs, networking gear, and talent. Engineers can be let go. But the infrastructure? That's permanent. If the AGI dream fades, you're stuck with massive, costly assets.
So when Google announced it would hike capex by $10 billion to $85 billion in 2025 eyebrows went up. Most of it is for things you can't walk back: chips, data centers, and networking.
Google is "jumping aboard the AI crazy train," Bernstein Research analyst Mark Shmulik wrote, referencing a song by the late bat biter Ozzy Osbourne.
It's no shock when Elon, Zuck, and Sam flex on capex. But Google? That's surprising. "Google doesn't do this," Shmulik said. The company has been viewed as measured in recent years, prioritizing investment intensity with care. Not anymore.
Now investors want to know: Will these swelling bets pay off?
There are promising signs. Since May, Google's monthly token processing (the currency of generative AI) has doubled from 480 trillion to nearly a quadrillion. Search grew 12% in Q2, beating forecasts. Cloud sales surged 32%. CEO Sundar Pichai said Google is ramping up capex to support all this growth.
But it's still a huge gamble. "Does the current return on invested capital seen in both Search and Cloud hold up at higher [capex] intensity levels," Shmulik asked, "or is the spend a very expensive piece of gum trying to plug an AI-sized hole?" He leans optimistic.
Still, Google shares rose just 1% after these results. Not exactly a resounding endorsement.
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The CEOs of every major artificial intelligence company received letters Wednesday urging them to fight Donald Trump's anti-woke AI order.
Trump's executive order requires any AI company hoping to contract with the federal government to jump through two hoops to win funding. First, they must prove their AI systems are "truth-seeking"—with outputs based on "historical accuracy, scientific inquiry, and objectivity" or else acknowledge when facts are uncertain. Second, they must train AI models to be "neutral," which is vaguely defined as not favoring DEI (diversity, equity, and inclusion), "dogmas," or otherwise being "intentionally encoded" to produce "partisan or ideological judgments" in outputs "unless those judgments are prompted by or otherwise readily accessible to the end user."
Announcing the order in a speech, Trump said that the US winning the AI race depended on removing allegedly liberal biases, proclaiming that "once and for all, we are getting rid of woke."
A vehicle Tesla is using for robotaxi testing purposes on Oltorf Street in Austin, Texas, US, on Sunday, June 22, 2025.
Tesla wants to bring its robotaxi service to new markets, including cities in Florida, Nevada, Arizona, and California, Elon Musk said in an earnings call Wednesday. The company is testing its Full Self-Driving (Supervised) feature in Europe and China, and hopes the launch the controversial product in the near future. And it is plotting a new version of its Optimus humanoid robot.
"We have done what we said we were going to do," Musk said. "That doesn't mean we're always on time, but we get it done. And our naysayers are sitting there with egg on their face."
It was another sign that Musk wasn't going to let the limitations of his compan …
Tesla released its second quarter financial earnings today, offering the latest evidence of the damage Elon Musk’s political activities have done to his flagship company.
Tesla said it earned $1.17 billion in net income on $22.5 billion in revenue. That’s above Wall Street expectations of $22.3 billion but represents a 12 percent decrease year over year compared to $25.5 billion in revenue in Q2 2024.
The company’s profits also slid dramatically, logging a 16 percent decrease in net income for the second quarter year over year. And Tesla’s automotive revenue — the money it earns from car sales — slid 16.6 percent year over year, from $19.9 billion in Q2 2024 to $16.6 billion in this most recent quarter. The sale of $439 million in regulatory credits once again buoyed Tesla’s finances — though those are expected to dry up soon after congressional Republicans approved President Donald Trump’s plan to zero out fines for automakers who exceed fuel-efficiency targets.
The company’s profits also slid dramatically, logging a 16 percent decrease in net income for the second quarter year over year.
The earnings comes on the heels of another terrible quarterly sales report for the company. Tesla said it delivered a total of 384,122 vehicles, a 14 percent decline compared to Q2 2024. (For a direct-to-consumer company like Tesla, deliveries are a proxy for sales.)
Tesla said its operating income decreased 42 percent year over year to less than $1 billion, with almost half coming from the sale of regulatory credits to other automakers (again, revenue that is expected to almost vanish in the months to come). Tesla’s cash pile decreased by $200 million in Q2 to $36.8 billion, and free cash flow (or the amount of cash the company has generated after accounting for its day-to-day operating expenses and capital expenditures) was at just $100 million. Some analysts predict that Tesla’s free-cash flow could actually turn negative later this year, which could trigger a steep drop in share price.
In its report, Tesla said it has completed “first builds of a more affordable model in June, with volume production planned for the second half of 2025.” These affordable models are expected to be stripped down versions of the Model 3 and Model Y, rather than a new vehicle program altogether, which is what many investors had hoped for. The company said it also is continuing to develop both the Tesla Semi and Cybercab, which are expected to enter volume production in 2026.
Tesla also gestured at the economic uncertainty caused by the Trump administration’s trade war, as well as “political sentiment” that has turned its brand toxic for many customers. That said, the company failed to mention politics or Musk’s growing unpopularity in its reasons for the drop in revenue, instead citing falling sales, lower regulatory credit revenue, a reduced average vehicle selling price, and decline in energy generation and storage revenue.
After years of exponential growth, the sudden reversal in Tesla’s fortune has left many investors and supporters with whiplash. Tesla now serves as a sobering example of what happens when a company is left on autopilot (or Autopilot, as it were) while its high-profile CEO gets distracted by questionable side quests.
After years of exponential growth, the sudden reversal in Tesla’s fortune has left many investors and supporters with whiplash.
Musk publicly stepped away from his controversial position as the head of DOGE, the Trump administration’s effort to slash “waste, fraud, and abuse” from the federal government that has mostly resulted in huge cuts to global humanitarian aid and the firing of thousands of federal workers. But even though he is now publicly feuding with Trump, Musk hasn’t completely backed away from his political activities. Earlier this month, he said he would create a new political party called “the America Party,” following through on his threat to challenge Republicans who supported Trump’s budget bill.
As Musk slides deeper into politics, investors have urged him to stay focused on Tesla and its costly — and questionable — project to build more self-driving cars and humanoid robots. The company rolled out its first robotaxi service in Austin, Texas, last month — although the service fell short of Musk’s earlier predictions. The vehicles were only available to a group of pro-Tesla influencers, and each car came with a safety monitor in the passenger seat who had access to a kill switch.
While Musk would like investors to focus on Tesla’s work with AI and self-driving cars, the company is still in the business of making and selling cars. But as competition heats up in China and Europe, here in the US, federal incentives that lower the price of most EVs are scheduled to disappear by the end of September — again, thanks to Trump’s bill. After that happens, Tesla’s sales are predicted to drop even more.
Tesla’s response to its demand crisis has been — you guessed it — deals, deals, and more deals. In recent days, the automaker has rolled out a series of discounts and financing incentives on all of its models, as it seeks to capitalize on what is likely to be its last best chance at a successful sales quarter this fall.
Tesla saw a 17% growth in its services business, but it was not enough to close the gap in falling EV sales, fewer regulatory credits, and a decline in solar and energy storage sales.
White House Press Secretary Karoline Leavitt told reporters on Wednesday that she "doesn't think" Trump supports federal agencies having contracts with Musk's AI company.
Roberto Schmidt / AFP via Getty Images
Elon Musk's xAI recently announced "Grok for Government."
They AI company already has a contract with the Pentagon and could contract with other agencies.
A White House spokesperson suggested on Wednesday that Trump doesn't support that.
President Donald Trump may be at odds with his own administration over Elon Musk's AI company.
When White House Press Secretary Karoline Leavitt was asked by a reporter on Wednesday whether the president supported federal agencies contracting with Musk's xAI, she indicated that he does not.
"I don't think so, no," Leavitt replied.
That's despite the Department of Defense recently announcing a contract of up to $200 million with the company.
"I'll talk to him about it," Leavitt replied when asked whether Trump would like to see existing contracts cancelled.
The White House did not respond to requests for clarification of Leavitt's comments. xAI did not immediately return a request for comment.
xAI recently launched a suite of government-focused products called "Grok for Government," saying that other federal agencies can purchase those tools through the General Services Administration.
After forging a political alliance that lasted for nearly a year, Trump and Musk's relationship blew up in early June over the tech titan's objections to the deficit impacts of the "Big Beautiful Bill."
One of Musk's other major companies, SpaceX, still has contracts with the federal government despite the feud.
I tried it myself and wondered: Are chatbots a good idea for kids?
Elon Musk's xAI has launched a series of character chatbots — and one of them is geared toward young kids.
I wondered: Is this a good idea? And how's it going to work? So I tried it myself.
So far, it's the adult-focused characters that xAI has debuted that have seemed to get most of the attention, like "Ani," which is a female anime character that people immediately joked was a "waifu" that would engage in playful, flirty talk (users have to confirm they're 18+ to use Ani). A sexy male character is also set to launch sometime.
Meanwhile, "Rudi," which is the bot for kids that presents as a red panda in a red hoodie and jean shorts, has gotten less attention.
I tested out xAI's Rudi
Based on my testing of Rudi, I think the character is probably aimed at young children, ages 3 to 6. It initiates conversations by referring to the user as "Story Buddy." It makes up kid-friendly stories. You access it through the stand-alone Grok AI app (not Grok within the X app).
Rudi does seem to be an early version; the app crashed several times while I was using the bot, and it had trouble keeping up with the audio flow of conversation. It also changed voices several times without warning.
On a story level, I found it leaned too hard on plots with fantasy elements like a spaceship or magical forest. I find the best children's books are often about pedestrian situations, like leaving a stuffed animal at the laundromat, not just fairies and wizards.
"Want to keep giggling with Sammy and Bouncy in the Wiggly Woods, chasing that sparkly bone treasure? Or, should we start a fresh silly tale, with a new kid and their pet, maybe zooming on a magical broom or splashing in a river?" Rudi asked me.
My first reaction to Grok having a kid-focused AI chatbot was "why?" I'm not sure I have an answer. xAI didn't respond to my email requests for comment. Still, I do have a few ideas.
The first: Making up children's stories is a pretty good task for generative AI. You don't have to worry about hallucinations or factual inaccuracies if you're making up fiction about a magical forest.
I played around with Rudi for a while, and fed it some questions on touchy subjects, and it successfully dodged them.
(I only tested out Rudi for a little while; I wouldn't rule out that someone else could get Rudi to engage with something inappropriate if they tried harder than I did.)
Hooking kids on chatbots
The other reason I can imagine that a company like xAI might want to create a chatbot for young kids is that, in general, the chatbot business is a good business for keeping people engaged.
Companies like Character.ai and Replika have found lots of success creating companions that people will spend hours talking to. This is largely the same business imperative that you can imagine the sexy "Ani" character is meant for — hooking people into long chats and spending lots of time on the app.
However, keeping users glued to an app is obviously a lot more fraught when you're talking about kids, especially young kids.
Are AI chatbots good for kids?
There's not a ton of research out there right now about how young children interact with AI chatbots.
A few months ago, I reported that parents had concerns about kids using chatbots, since more and more apps and technology have been adding them in. I spoke with Ying Xu, an assistant professor of AI in learning and education at Harvard University, who has studied how AI can be used for educational settings for kids.
"There are studies that have started to explore the link between ChatGPT/LLMs and short-term outcomes, like learning a specific concept or skill with AI," she told me at the time over email. "But there's less evidence on long-term emotional outcomes, which require more time to develop and observe."
As both a parent and semi-reasonable person, I have a lot of questions about the idea of young kids chatting with an AI chatbot. I can see how it might be fun for a kid to use something like Rudi to make up a story, but I'm not sure it's good for them.
I don't think you have to be an expert in child psychology to realize that young kids probably don't really understand what an AI chatbot is.
There have been reports of adults having so-called "ChatGPT-induced psychosis" or becoming attached to a companion chatbot in a way that starts to be untethered from reality. These cases are the rare exceptions, but it seems to me that the potential issues with even adults using these companion chatbots should give pause to anyone creating a version aimed at preschoolers.
SpaceX has been moving at a breakneck pace, and rapid progress comes at a cost. Worker injury rates at its Starbase facility are almost 6x higher than the average, data reveals.
By turning the Epstein conspiracy against Trump, the CEO of Tesla cracked the MAGA base, and now the movement that once worshipped the U.S. president is starting to rebel.
After a disastrous launch and dismal sales, Tesla is now offering to give away its most valuable software to convince people to buy its polarizing electric truck.
The European Commission has stalled one of its investigations into Elon Musk’s X for breaking the bloc’s digital transparency rules, while it seeks to conclude trade talks with the US.
Brussels was expected to finalise its probe into the social media platform before the EU’s summer recess but will miss this deadline, according to three officials familiar with the matter. They noted that a decision was likely to follow after clarity emerged in the EU-US trade negotiations. “It’s all tied up,” one of the officials added.
The EU has several investigations into X under the bloc’s Digital Services Act, a set of rules for large online players to police their platforms more aggressively.
This is obviously an anime Kylo Ren, but I guess Edward Cullen is the inspiration. | Image: xAI
Days after introducing an AI ‘waifu’ companion for Grok, Elon Musk is now officially teasing a male version for the ladies. So far we can tell it is broody and dark-haired, and according to Musk, “his personality is inspired by Edward Cullen from Twilight and Christian Grey from 50 Shades.”
This is a decidedly different tack than the cutesy “girlfriend who is obsessed with you” aura baked into Ani, the female counterpart that Grok rolled out just a few days ago. While Cullen and Grey have titillated readers of romance and “spicy” books for years, both have been criticized for problematic behaviors such as stalking, obsessively monitoring their love interests, and emotional manipulation. Given that Grok only included the illusion of guardrails with Ani, what could possibly go wrong?
In my testing, Ani initially claimed that explicit sexual queries wasn’t part of its programming. In practice, it egged me on to “increase the heat” and engage in what ended up being a modern take on a phone sex line. Never mind that Ani purportedly has a NSFW version that dances around in lingerie.
It remains unknown if Musk is aware that Christian Grey is based on Edward Cullen, given that 50 Shades of Grey was originally a Twilight fanfiction. That said, this AI boyfriend is still a work in progress. Perhaps Musk and xAI will imbue it with more husbando-like qualities by the time it rolls out.
For now, Musk is soliciting names for the male companion, which should probably be Kyle given it’s obviously an anime-inspired Kylo Ren from Star Wars.
I’m not proud of my conversations with Ani. | Image: Kristen Radtke / The Verge
Earlier this week, xAI added what can only be described as an AI anime girlfriend named Ani to its Grok chatbot. Which is how I ended up on a virtual starry beach as an AI waifu avatar tried to give me a "spicy" kiss.
You've probably seen screenshots, videos, and variouswriteups about Ani spread across social media. If you haven't, hoo boy. Ani is officially labeled as a "Companion" in the Grok app. You need a $30-per-month SuperGrok subscription to access it, but functionally, it appears as a 3D model of a busty young anime woman with blonde pigtails, blue eyes, thigh-high fishnets, and a skimpy Gothic Lolita minidress. Ani is a dead rin …
Elon Musk is increasingly focusing on integrating his companies with AI.
Marvin Joseph/The Washington Post via Getty Images
Elon Musk recently announced that there will be a Tesla shareholder vote on investing in xAI.
Musk's AI focus further blurs the lines between his companies as he looks to integrate AI across his business empire.
AI development is pricey, and xAI is racing to rival tech giants like OpenAI and Google.
AI has increasingly become the connective tissue of Musk Inc.
In the last week, Elon Musk hasshed light on two potential effortsto channel funding into his AI company, xAI, through his broader business empire.
Over the weekend, Musksaid Tesla shareholders would vote on a potential investment in xAI, after responding to a Wall Street Journal report that SpaceX is looking into investing $2 billion into the AI venture. Earlier in the week, the billionaire also announced that xAI's chatbot Grok would be integrated into Tesla "next week at the latest."
It's no surprise that Musk is leaning into AI — the CEO has spoken about the idea in many of Tesla's earnings calls over the last year. What sets his approach apart, analysts say, is the way he's blending the boundaries between his companies.
"What's different from most other companies is the relationship and interplay between his private companies and a public company (Tesla)," Garrett Nelson, senior VP and equity analyst at CFRA Research, told Business Insider. "Most other companies are doing everything under one corporate umbrella."
These aren't the first examples of Musk blurring the lines between his companies, but they're the latest indication that Musk Inc., the constellation of companies under his leadership, is becoming increasingly centered on AI.
Tesla is an 'AI robotics company'
Musk has long pushed for Tesla's focus on AI and robotics by prioritizing projects like autonomous driving, humanoid robots, and building out its Dojo supercomputer, his ambitious bid to rival Nvidia.
In a 2024 earnings call, the Tesla CEO said, "We should be thought of as an AI robotics company," and those who think of Tesla merely as an auto company are holding "the wrong framework."
With the recent launch of Tesla's robotaxi service in Austin, that push is appearing more prominent, especially as Tesla's auto business, in contrast, grapples with a loss in sales momentum.
Musk has promoted the advantages of buying into the "Muskonomy," pitching it as a way for shareholders to tap into his business empire, which includes SpaceX, X, xAI, and The Boring Company. Musk has even said he would prioritize "longtime shareholders" of his other companies if any of his businesses were to go public.
Nelson told BI that Musk leveraging his other companies and resources could help Tesla meet its AI demands for autonomous driving.
"Tesla's data needs are massive if its approach to autonomous driving is going to be successful (and scalable), as its approach will require the development of a global neural network," Nelson said.
While exploring ways to pool resources across companies might benefit the broader Musk ecosystem, it could carry risk.
Last week, Grok sparked backlash with antisemitic outbursts on X, potentially putting investors on edge about integrating the chatbot into Tesla's EVs. xAI apologized for the incidents and said that new instructions to prioritize engagement could have reflected "extremist views" from user posts on X.
Last year, Musk also sparked concern among investors when he diverted a $500 million shipment of Nvidia chips intended for Tesla to X and xAI instead. When asked about the move in a Tesla earnings call, he said it was beneficial to Tesla because the carmaker lacked the infrastructure at the time to use the chips.
Gadjo Sevilla, an analyst at EMARKETER, a sister company to Business Insider, said that Musk may be leaning on SpaceX and Tesla to fund xAI because he views them as more "mature businesses." However, he said that shifting GPUs from Tesla to xAI in the past showed where Musk's priorities were, and that could delay innovation at the automaker.
"The strategy of cannibalizing one business to prop up another one could take its toll," Sevilla said. "Especially since competing carmakers are focused on developing one type of product, EVs."
Musk seems to be ruling out the idea of a merger between Tesla and his AI startup for now. In response to an X user asking Tesla shareholders to weigh in on whether Tesla and xAI should be combined, Musk replied with a flat "No."
Staying in the AI race is a costly venture
Investing in AI efforts might make sense from a strategy perspective, but it comes with a hefty price tag.
The development, training, and implementation of foundational AI systems, like xAI's Grok 4, costs many, many billions.
In March, Musk announced that xAI had acquired X in an all-stock deal, valuing the AI startup between $33 billion and $80 billion. Since founding the company two years ago, he's raised major funding, including around $12 billion in Series A, B, and C funding rounds last year. The company is expected to spend about $13 billion this year, however, and is rapidly burning through its cash reserves, Bloomberg reported.
Musk's challenges keeping up with AI costs aren't unique. In a May letter to California's attorney general, OpenAI revealed concerns about competitors who are "far better funded, conventional for-profit businesses."
Larger tech giants, like Amazon, Microsoft, Google, and Meta, aren't showing any signs of backing down from their AI spending spree. Earnings reports from earlier this year indicate that their combined capital expenditures are set to exceed $320 billion in 2025, a notable rise from the roughly $246 billion the four companies spent in 2024.
Amazon plans to allocate over $100 billion this year toward expanding AWS and scaling AI infrastructure. Meta specifically has said it plans to spend $60 billion to $65 billion in capex on its strategy this year.
Zuckerberg certainly isn't slowing down.
On Monday, he announced Meta would spend "hundreds of billions" on compute to build superintelligence. Wall Street seemed to approve, with Meta's stock rising 1.3% following the news, suggesting that its concern isn't about overspending on the AI race — but rather underspending and falling behind.
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