Alphabet and Tesla earnings highlight rising capital expenditure on AI, weighing on investor sentiment ahead of the market open.
US equity futures edged lower ahead of the opening bell, with S&P 500 and Nasdaq futures both down 0.2%. The decline follows late-session selling yesterday, driven by geopolitical tensions and disappointing big tech earnings.
Alphabet reported revenue and earnings above expectations but raised its annual spending budget to between $195 billion and $205 billion, primarily for AI investments. The company also posted a quarterly free cash flow deficit of $5.9 billion, its first negative print as a public company. Tesla, meanwhile, beat revenue estimates but saw profit margins squeezed by price cuts and higher spending on AI-related projects.
Investors are questioning whether the revenue generated from AI investments will justify the mounting capital expenditure, contributing to a cautious pre-market mood.