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. The reaction highlights a widening gap on Wall Street between those who see today’s outlays as the foundation of a multi-year growth cycle and those who fear the industry is overspending ahead of demand.

“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 .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. Hyperscalers — the largest cloud operators that run global data-center networks — are pouring capital into chips, servers and power capacity, and much of that investment shows up as heavy capital expenditure (capex) long before it turns into revenue. For investors, the central question is whether that spending compounds into durable earnings or simply compresses margins while the market waits.

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. In other words, the market is asking Tesla to show that its AI and robotics bets can move from promise to measurable results, even as the company keeps funneling cash into long-dated projects.

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. Prediction markets like Kalshi let traders bet on real-world outcomes, and the gap between Ives’ view and the crowd underscores how uncertain the path of Musk’s empire remains.

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. If forward guidance and cloud demand keep climbing, the case for patience strengthens; if spending outpaces adoption, calls of an AI bubble will only grow louder.

Source: BeInCrypto