U.S. stock indexes were on track to open lower on Thursday as concerns over heavy AI spending resurfaced after the first batch of Big Tech earnings, while another jump in oil prices linked to the widening Middle East conflict further dampened sentiment.
Second-quarter results from Alphabet GOOGL.O and Tesla TSLA.O, the first of the so-called "Magnificent Seven" megacap companies to report this season, failed to impress investors.
Alphabet posted its strongest-ever quarter of growth in its cloud computing business, but the results did little to reassure investors as attention shifted to its higher spending plans.
Shares of Google's parent fell 5.4% in premarket trading.
Tesla dropped 7.7% after reporting negative free cash flow for the second quarter for the first time in more than two years.
“Alphabet is spending hundreds of billions of dollars as it looks to stay ahead in the AI arms race," said AJ Bell investment director Russ Mould.
"But there is still a healthy degree of scepticism about the ability of these investments to generate a commensurate level of return."
Capital spending plans will remain in focus when other major technology companies report next week, as investors question whether the huge sums being poured into AI are translating into meaningful returns, and if profit growth can justify elevated stock valuations.
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