U.S. Stocks Close Lower | Google & Tesla Sink After Hours | Oil Surges | Gold Reclaims $4,130

Market Overview

Global markets focused on three major themes on Wednesday.

First, earnings from major technology companies painted a mixed picture. Google reported Q2 revenue of $119.8 billion, up 24% year over year, while Google Cloud revenue surged 82%. However, shares fell 4.2% in after-hours trading after the company raised its full-year capital expenditure guidance to $195 billion to $205 billion, signaling even heavier AI infrastructure investment. Tesla posted 26% revenue growth, but net profit declined 18%, and free cash flow turned negative for the first time in two years, sending its shares down more than 5% after the close. U.S. equities finished modestly lower, with the Nasdaq Composite falling 0.57%, the S&P 500 slipping 0.14%, and the Dow Jones Industrial Average edging down 0.01%.

Second, geopolitical tensions continued to support safe-haven demand. The U.S. military campaign against Iran entered its 11th consecutive day, with ceasefire hopes fading. Brent crude for September delivery climbed 3.36% to $94.07 per barrel, reaching a six-week high, while WTI crude rose 2.95% to $86.83. Safe-haven buying lifted spot gold 1.31% to $4,130.07 per ounce, while spot silver gained 1.55% to $59.72.

Third, the global AI infrastructure spending race accelerated further. AMD secured a multi-billion-dollar chip supply agreement with Anthropic, representing approximately 2 gigawatts of AI computing capacity, while OpenAI reportedly raised its long-term cloud infrastructure spending target to $750 billion. In Asia, China's Shanghai Composite Index edged up 0.07%, while the ChiNext Index dropped 3.23%. Meanwhile, the Bank of Japan signaled a faster pace of policy tightening, pushing the 2-year Japanese government bond yield to its highest level since 1995.

Market OutlookCapital Spending Race Faces Cash Flow Reality

Google raised its full-year capital expenditure guidance by roughly $15 billion. With Google Cloud growing 82% and its remaining performance obligations reaching $514 billion, underlying demand remains exceptionally strong. Yet the stock still dropped 4.2% after hours, suggesting investors are no longer questioning whether demand exists. Instead, they are increasingly focused on how long it will take for these massive AI investments to generate meaningful returns.

Tesla's first negative free cash flow in two years highlights the same challenge from a different angle. Over the coming quarters, investors may pay less attention to headline revenue growth and instead focus on whether operating cash flow can keep pace with rising depreciation expenses and aggressive capital investments.

Strait of Hormuz Remains Key Inflation Risk

Brent crude climbed above $94 per barrel, marking a six-week high. At the same time, the U.S. 10-year Treasury yield rose 3.45 basis points to 4.6626%, while the 30-year yield approached 5.14%. The simultaneous rise in oil prices and Treasury yields suggests markets are pricing in not only potential supply disruptions, but also more persistent inflationary pressures.

Should shipping through the Strait of Hormuz face meaningful disruptions, higher energy prices could ripple through transportation and industrial supply chains, potentially delaying the Federal Reserve's expected rate-cutting cycle. Investors should monitor this development alongside today's policy decision and commentary from the European Central Bank.

Key Events to Watch

• European Central Bank announces its latest interest rate decision, followed by President Christine Lagarde's press conference.

• U.S. Initial Jobless Claims will provide another key gauge of labor market cooling.

• Intel and SAP are scheduled to report earnings today.

• AMD will host its Advancing AI conference, where CEO Lisa Su is expected to deliver a keynote address.

• The U.S.-Iran conflict enters its 11th day, with markets closely monitoring shipping conditions in the Strait of Hormuz and the direction of oil prices.

• Following the Bank of Japan's increasingly hawkish signals, markets now assign roughly a 72% probability of another rate hike before October.