Alphabet made history in two ways on Wednesday.

First, it had its most-profitable quarter in corporate history. Reporting $112 billion in profit, that’s its first 12-figured quarterly profit in history. But 69% of that came from unrealized paper gains on its stakes in SpaceX and Anthropic, not the core business, and Wall Street looked straight through it.

Stripping that out, however, Google still ostensibly had an excellent quarter; its cloud computing business, now the core of the company, soared 82%. So why did investors punish Alphabet today, sending their shares down nearly 7%, the worst day since tariffs?

Because of the other record it set: for the first time in the company’s history, it became cash flow negative, meaning less cash entered the company than left it last quarter. Management also warned that 2027 capital expenditures would be “significantly” higher, further deepening anxiety on the Street. The company’s latest filing Thursday shows more than $800 billion in purchase commitments and other obligations, an eye-popping number that reveals some sneakier expenses like some $51 billion spent backstopping other companies’ data centers.

At least six firms cut their price targets for Alphabet in response, including Piper Sandler (to $395), UBS (to $379) and D.A. Davidson, whose $350 target was one of the most bearish on the Street. Only Barclays raised its target. The damage was contagious, spreading outward to Microsoft, Amazon, Nvidia and the chip complex, and compounded this week by jitters over a new wave of powerful Chinese open-weight models. Tesla also reported a profit margin decline and high capital expenditure, sending its stock down 15%.

“The fact that we crossed over to negative cash flow was kind of a negative milestone, and people are reacting to that,” Gil Luria, head of technology research at D.A. Davidson, told Fortune. “Maybe there was a sense that we’d never get to that point, and we just did.”

Yet Luria, despite cutting his target, said the market was overreacting. His concern was never the spending but the valuation; earlier this year, with the stock near $400, “it was being valued as if it was the only winner.” At around $320, he said, “Google’s valuation is a lot more reasonable—because it’s the valuation of a company that’s a winner, as opposed to the winner.” He expects Microsoft, Amazon and Alphabet all to profit from supplying AI compute for years.

The bullish case, he said, is hiding in plain sight: Google Cloud’s “out of this world” growth. He estimated Alphabet will earn $15 billion to $20 billion this year directly from its compute buildout. “Nobody wants to hear that on a negative-milestone day where the CFO just told us it’s going to get worse before it gets better.”

Luria, however, worried about that tangle of investments which bind the AI giants to their own customers; the love triangle of Google, Amazon and Anthropic; Microsoft and OpenAI, Nvidia and CoreWeave. “This ecosystem is propping itself up,” he said, and the off-balance-sheet backstops give him pause: “That term came into parlance around Enron, which is why I never like hearing it.” But he drew a line at calling it circular. Consumers and businesses are now spending at a $120 billion annual rate on AI, he noted—”that number was zero two years ago.” “That’s real spend. There’s nothing circular about that.”