Hello from London, this is Leonie Kidd. Brace yourself, Big Tech – this quarter, the spotlight is firmly on spending habits, a lesson learned the hard way by Alphabet and Tesla. Despite delivering solid quarterly results, massive increases in capital expenditure (capex) and strategic investments, particularly in the burgeoning AI sector, have spooked investors, sending their stock prices lower.
Alphabet, the parent company of Google, saw better-than-expected revenues overshadowed by a projected capex spend of up to $205 billion for 2026. Chief Financial Officer Anat Ashkenazi clarified that this substantial increase is driven by an accelerated delivery of capacity to meet escalating demand. Similarly, Tesla's skyrocketing costs have raised investor eyebrows. Free cash flow turned negative as Elon Musk steers the company beyond its traditional vehicle sales into ambitious ventures like driverless robotaxis and humanoid robots. A beat on quarterly revenue was, once again, overshadowed by a staggering 142% increase in capital expenditure, with the company previously hinting at a potential $25 billion outlay this year.
The market is now keenly awaiting further details on spending plans from other tech behemoths, including Meta, Microsoft, Amazon, and Apple, all slated to release their results over the coming days. Funding the AI boom has emerged as a critical metric for assessing balance sheets across the technology sector.
Meanwhile, in Europe, Italian banking giant Unicredit has defied expectations, reporting a net profit of 2.9 billion euros ($3.3 billion) for the second quarter. CEO Andrea Orcel, in an exclusive interview with CNBC, expressed satisfaction with the progress made on the acquisition of Commerzbank shares, indicating that a final agreement would be mutually beneficial for both banks.
Geopolitical tensions are also making waves, pushing crude prices sharply higher in early Thursday trading. Renewed threats by U.S. President Donald Trump to strike key Iranian infrastructure have escalated concerns. Furthermore, another attack on a tanker off the coast of Saudi Arabia has kept tensions elevated, following the U.S. Central Command's confirmation of retaliatory strikes for ongoing targeting of ships. Goldman Sachs analysts predict Brent crude could exceed $120 per barrel in the fourth quarter and average $100 in 2027 if disruptions to the Strait of Hormuz persist.
Amidst this volatile backdrop, the European Central Bank (ECB) is scheduled to hold its policy meeting later today, with expectations for rates to remain steady at 2.25%. The renewed hostilities in Iran have prompted a re-evaluation of the interest rate path, given an “extremely volatile” economic outlook.
And finally, the focus on Iran brings attention to 'Pickaxe Mountain,' the underground nuclear facility President Donald Trump has threatened to bomb. This ratchets up tensions between the U.S. and Iran, drawing renewed attention to one of Iran's most secure sites. Nuclear weapons expert David Albright noted that the mountain is capable of housing a centrifuge enrichment plant and nuclear weaponization activities.
