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Investing.com -- Alphabet’s strong second-quarter results have added momentum to the intensifying artificial intelligence investment cycle, according to Wolfe Research.
The firm noted that Alphabet’s (NASDAQ:GOOGL) results “provided further fuel for the AI spending narrative,” as demand for AI products helped drive an increase in both sales and capital expenditures.
Alphabet also raised its 2025 capital spending outlook by an additional $10 billion.
“Our sense is GOOGL’s results will continue to spur the AI ‘Arms Race’ across Mag 7 companies and the market as a whole,” Wolfe Research wrote in a note following the report.
“We expect further upside revisions to capital spending by the Mag 7 over the course of this earnings season.”
Wolfe analysts said that aggregate capital spending among the group is now expected to grow 40% year over year in 2025 as companies ramp up their AI infrastructure.
This escalation in investment comes as Big Tech battles for leadership in AI platforms, tools, and monetization opportunities.
Alphabet’s update arrived alongside Tesla’s weaker report, with Wolfe describing the overall results from the two companies as “mixed.”
While Tesla (NASDAQ:TSLA) missed both top- and bottom-line estimates, Alphabet delivered beats on both metrics.
The note underscores that AI remains the driving force behind capital deployment decisions for the largest U.S. tech companies.
Wolfe sees Alphabet’s earnings as a catalyst for continued acceleration in AI-related investment, helping shape spending patterns across the industry in the coming quarters.