Alphabet beat expectations. Big deal. Wall Street didn’t care. The tech giant’s cloud business surged over 80 percent, but all anyone could look at was the eye-watering price tag of the AI arms race. Alphabet jacked up its capital expenditure forecasts yet again, pushing this year’s projected AI-related spending past the $200 billion mark. That is a staggering amount of cash to throw into the furnace. Naturally, the stock slid three percent before the opening bell. Investors are getting twitchy about delays with the Gemini AI model and the sheer velocity of this cash burn.
But one man’s cost is another’s revenue. South Korean chipmakers, licking their chops at the prospect of Alphabet’s massive spending spree, saw their shares jump over four percent. It wasn’t a party for everyone in the semiconductor sandbox, though. Europe’s STMicroelectronics plunged 14 percent after missing its earnings targets. Meanwhile, Tesla got dragged. Elon Musk’s outfit shed four percent after posting its first negative free cash flow in more than two years. Turns out, even hype has its limits. All eyes now turn to Intel, reporting later today. Its stock is still up nearly threefold this year despite a June pullback, making this a high-stakes tightrope walk.
Futures are bleeding red. Both US and European markets drifted lower, weighed down by the tech hangover. Then there is the geopolitical mess. Oil is creeping toward $98 a barrel. Why? The usual chaos. Yemen’s Houthi rebels are targeting Saudi tankers in the Red Sea, forcing shipping routes to rewrite themselves on the fly.
This energy spike is rattling the bond markets. Short-term US Treasury yields just touched a 17-month high. Over in Europe, the central bank meets today. Don’t expect any charity. With winter storage replenishment looming and natural gas prices threatening to spark another inflation bonfire, the ECB’s rhetoric is bound to be hawkish. Prepare for pain.
