Wedbush Securities analyst Dan Ives told CNBC's 'Power Lunch' that the artificial intelligence spending buildout is only 15% complete. His comments came after a rough day for tech stocks: Tesla shares dropped 14.5% and Alphabet fell nearly 7%, even though Google Cloud revenue jumped 82% to $24.8 billion.
The selloff and the numbers
Investors hit the sell button hard on two of the biggest names in tech. Tesla lost 14.5% in a single session. Alphabet slid almost 7% despite a blockbuster quarter from Google Cloud — revenue hit $24.8 billion, up 82% from a year ago. The market clearly wanted more.
Ives called the pullback a timing problem, not a valuation problem. He argued the AI buildout is still in its early stages, with 85% of the spending yet to come. That's a lot of runway left.
Ives' Las Vegas Strip analogy
To illustrate his point, Ives compared hyperscalers' AI spending to early construction on the Las Vegas Strip. The big money goes in first, the payoff comes later. He sees the current selloff as a short-term hiccup in a long-term trend.
But not everyone is buying that narrative. The market's reaction suggests some investors are losing patience with the timeline.
Tesla's patience fading but not broken
Ives acknowledged that investor patience for Tesla is fading, but he said it's not broken yet. The company's big bets on AI, autonomous driving, and the Optimus robotics platform haven't delivered near-term payoff. That's weighing on the stock.
Still, Ives sees a potential game-changing event on the horizon. He estimated a better-than-80% probability that SpaceX eventually acquires Tesla. The prediction market Kalshi prices a roughly 69% chance of a Tesla-SpaceX merger before 2028.
Ives' 'early innings' call will face a real test in the coming days. More Big Tech earnings reports are due, and Intel reported its own numbers the same evening as the selloff. Investors will be watching closely to see if other companies can justify their AI spending.
The question hanging over the market: is this just a timing issue, or are the valuations getting ahead of reality? Ives is betting on timing. The next few earnings calls will tell us who's right.
