Wall St Falls on AI Spending Fears, $98 Oil
SkimNews Take
AI's capital intensity meets its energy intensity: tech capex worries and oil at $100 aren't parallel headlines but compounding pressures, since the same AI buildout driving spending concerns is profoundly energy-hungry.
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- Wall Street futures dropped Thursday — Dow -0.43%, S&P 500 -0.39%, Nasdaq 100 -0.37% — as the first Big Tech earnings revived AI spending worries and a jump in oil prices weighed on sentiment.
- Alphabet shares fell 3.9% in premarket trading despite posting its strongest-ever quarter of cloud growth, as investors pivoted to its higher spending plans.
- Tesla dropped 5.8% after reporting negative free cash flow for Q2 — its first cash burn in more than two years — amid surging capex tied to its AI and robotaxi push.
- Brent crude rose to $98 a barrel, its highest level since early June, after Iranian-aligned Houthis opened a new front near the Bab el-Mandeb strait, shifting the market's attention from the Strait of Hormuz to the Red Sea.
- 2-year Treasury yields hit a 17-month high as traders raised bets on a Fed rate hike — now pricing a 35% chance of a 25bp increase at the July meeting, up from 12% a week earlier, with September odds at 55%.
- ServiceNow jumped 8.1% after raising its annual subscription revenue forecast for the second time on AI-driven demand, while Texas Instruments fell 5.2% despite forecasting quarterly revenue above estimates.
Why it matters: The first Magnificent Seven earnings showed AI capex isn't yet translating into investor comfort — Alphabet's spending overshadowed its cloud beat and Tesla posted its first cash burn in two years. With Brent at $98 on a new Red Sea front, traders moved July Fed rate-hike odds from 12% to 35%, pushing 2-year yields to a 17-month high.
