Alphabet’s results mark the start of a critical test for the AI trade, especially for the suppliers in Asia
ASIAN shares advanced as regional chipmakers climbed on expectations they will benefit from the billions of dollars flowing into the artificial intelligence buildout. Oil extended its recent rally.
MSCI’s Asia Pacific equities gauge rose 0.8 per cent, with the Kospi – a bellwether for AI investments – adding 2.5 per cent.
Samsung Electronics and SK Hynix both jumped more than 2 per cent as investors bet the South Korean chipmakers will be among the beneficiaries of global AI spending. An Asian gauge of semiconductor stocks was set for a third day of gains.
Still, caution lingered with Nasdaq 100 futures dropping 0.3 per cent and Alphabet sliding more than 3 per cent in extended trading on its higher-than-expected capital spending plan.
Tesla dropped 4 per cent after missing estimates, while IBM edged lower after cutting full-year sales outlook.
Oil advanced after Iran-backed Houthi militants said they targeted two Saudi Arabian tankers in the Red Sea, escalating the Middle East conflict and threatening deeper supply disruptions.
Global benchmark Brent rose as much as 2.5 per cent to over US$96 a barrel, the highest level since early June.
Alphabet’s results mark the start of a critical test for the AI trade, especially for the suppliers in Asia. After the technology selloff in the week ended Jul 19, which sent a gauge of chipmakers into a bear market, earnings over the next two weeks will be scrutinised for signs that hundreds of billions of dollars invested in AI are beginning to generate commensurate returns.
“The increase in capex means a lot of those dollars will find their way to the order books in Asia,” said Josh Gilbert, Etoro APAC & Mideast lead analyst. “Investors are reading this as confirmation that the AI build-out is still accelerating and that’s good for the infrastructure underneath it.”
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Alphabet now expects capital spending to reach as much as US$205 billion in 2026, eclipsing its previous guidance and far exceeding Wall Street expectations. The company is accelerating investment in AI computing capacity to meet surging demand, executives said in a call with analysts.
Investors will turn their focus to next week’s results from Microsoft, Meta Platforms and Amazon.com for guidance on capital spending.
While there might be a deceleration in capex by hyperscalers, it does not change the opportunity for long-term active managers, Vikas Pershad, a portfolio manager at M&G Investments, said on Bloomberg TV. “AI optimism remains intact, but the burden of proof has shifted decisively onto management teams,” Mark Malek, chief investment officer at Siebert Financial, wrote in a note. “Future earnings calls will increasingly focus on return on invested capital rather than AI ambitions.”
Elsewhere, yields on the US Treasury two-year note held at 4.30 per cent, having gained four basis points during the US session. The US 30-year bond yield has stayed above 5 per cent for the longest stretch since the dawn of the financial crisis, echoing investor concerns about a growing debt pile and sticky inflation.
Also, Indonesian stocks rallied, putting the benchmark on track to enter a bull market as an affirmed sovereign rating boosted sentiment and sustained tech optimism fuelled a regional rebound.
Investors are also weighing geopolitical tensions. US President Donald Trump vowed to hit Iranian bridges and power plants if Teheran continued attacking vessels in the Strait of Hormuz. Iran responded with its own warning.
The renewed escalation has fuelled concerns that higher energy prices could keep inflation elevated and complicate the US Federal Reserve’s policy outlook.
With the US central bank meeting on July 28 and 29, money markets are pricing about a 30 per cent chance of a rate increase and a 70 per cent probability that policymakers hold steady. The European Central Bank announces a policy decision later on Thursday.
“Diplomatic efforts to end the conflict in the Middle East have effectively stalled as military strikes continue with no sign of easing,” said Ian Lyngen at BMO Capital Markets. “The rally in energy continues to weigh on the Treasury market as hostilities between the US and Iran intensify.” BLOOMBERG
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