Alphabet set two company records on Wednesday, one of them highly profitable and the other troubling to investors.

The Google parent reported $112 billion in profit, its most profitable quarter in corporate history and its first quarterly profit figure with 12 digits. But 69% of that total came from unrealized paper gains on its stakes in SpaceX and Anthropic rather than from Alphabet's core operations, and Wall Street largely discounted the headline result.

Even excluding those gains, Google appeared to deliver a strong quarter. Its cloud computing business, now a central part of the company, grew 82%. Cloud has become the primary vehicle for monetizing AI infrastructure, with Google competing directly with Amazon Web Services and Microsoft Azure to rent computing capacity to developers building AI applications. Still, investors sold the stock on Thursday, pushing Alphabet shares down nearly 7% in their worst day since tariffs.

The reason was Alphabet's second record: for the first time in the company's history, it became cash flow negative, meaning more cash left the business than came in during the quarter. Management also said 2027 capital expenditures would be "significantly" higher, adding to concern on Wall Street. Alphabet's latest filing on Thursday showed more than $800 billion in purchase commitments and other obligations, including less visible costs such as about $51 billion spent backstopping other companies' data centers.

At least six firms responded by cutting their price targets for Alphabet, including Piper Sandler, which lowered its target to $395; UBS, which cut its target to $379; and D.A. Davidson, whose $350 target was among the most bearish on Wall Street. Barclays was the only firm to raise its target. The pressure spread beyond Alphabet to Microsoft, Amazon, Nvidia and the broader chip complex, while investor unease was also intensified this week by a new wave of powerful Chinese open-weight models. Tesla, meanwhile, reported a profit margin decline and high capital expenditure, sending its shares 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."

Luria, who cut his price target, nevertheless said the market reaction was excessive. He said his concern was not Alphabet's spending, but its valuation. Earlier this year, when the stock was near $400, "it was being valued as if it was the only winner," he said. At about $320, Luria 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 said he expects Microsoft, Amazon and Alphabet all to benefit for years from supplying AI compute.

The more constructive case for Alphabet, Luria said, is evident in Google Cloud's "out of this world" growth. He estimated that 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."

Still, Luria expressed concern about the web of investments connecting AI companies to their own customers, including the relationships among Google, Amazon and Anthropic; Microsoft and OpenAI; and Nvidia and CoreWeave. "This ecosystem is propping itself up," he said. He also said off-balance-sheet backstops are a concern: "That term came into parlance around Enron, which is why I never like hearing it."

But Luria stopped short of describing the arrangement as circular. Consumers and businesses are now spending at a $120 billion annual rate on AI, he said, compared with zero two years ago. "That's real spend. There's nothing circular about that."

This story was originally featured on Fortune.com