Global market risk sentiment was subdued on Wednesday, with U.S. stock markets trending lower. Investors awaited earnings from Google parent Alphabet to find the clearest signal yet on whether the massive investments tech giants are pouring into artificial intelligence can truly deliver returns. Meanwhile, Brent crude oil prices broke through $95 per barrel, further dampening market sentiment.
As of the time of writing, Dow futures were down 0.16%, S&P 500 futures were down 0.37%, and Nasdaq futures were down 0.90%.
The MSCI global equity index gained about 0.1%. In European markets, oil and gas stocks pushed the pan-European Stoxx 600 index up about 0.6%, while the technology sector lagged noticeably. In contrast, technology stocks faced pressure as investors awaited earnings results from AI giants.
In Asian markets, South Korea's KOSPI index and other market indices with high weightings in technology stocks pared their gains after strong early rallies.
On the individual stock front, server manufacturer Super Micro Computer saw its pre-market share price rise, driven by strong server demand. Software company Pegasystems fell sharply due to earnings missing expectations.
Alphabet Earnings: A Crucial Test for the AI Investment Cycle
Investors are currently focused on Alphabet's earnings report, as the company faces market skepticism over delays in its core AI model rollout. Previously, Alphabet indicated plans to significantly increase AI-related capital expenditures from 2025 levels, potentially reaching up to $190 billion this year.
The market hopes to find evidence in the earnings that these massive investments are yielding returns. However, companies building the global AI infrastructure also need to continue expanding spending to support current high valuations.
This earnings release comes at a time of high volatility for leading chip companies in the AI supply chain. There is market concern over whether the scale of AI investment is sustainable and whether massive capital outlays can translate into actual profits.
Amanda Lyons, an analyst at Energy Group Capital, stated, "Alphabet is not just reporting earnings; it's reporting on the health of the entire AI investment cycle."
She noted, "If management signals any reduction in AI investment intensity, the market impact won't be limited to Google; it will start questioning the sustainability of the entire AI infrastructure build-out cycle."
However, she emphasized, "Merely increasing capital expenditure is no longer enough. Investors increasingly want to see that these investments are generating tangible returns."
Tesla Earnings Also in Focus
As another key earnings event on Wednesday, investors will also watch whether Tesla can show progress in AI-driven growth. At the same time, the market widely expects Tesla to report its first quarterly cash burn in over two years.
Unlike most tech giants, if Tesla increases capital expenditure and raises its AI investment outlook, the market might react positively. Tesla's stock has fallen about 16% year-to-date.
Additionally, IBM and Texas Instruments are scheduled to report earnings after the market closes.
John Plassard, Chief Investment Officer at Cité Gestion, said, "Even the slightest market doubt about the commercial viability of AI or the return on infrastructure investment could shake the core driver that has propelled the market higher for nearly the past two years."
In other news, U.S. President Trump stated that all generic drugs imported into the United States will enjoy a two-year zero-tariff treatment starting August 1, after which the rate will rise to 100% within a year, and then further increase to 200%. Earlier this week, Trump announced a 50% tariff on some Canadian goods.
Soaring Oil Prices Reapply Pressure on Market Risk Appetite
Rising oil prices have become a significant factor suppressing market sentiment. Brent crude rose nearly 5%, breaking through $95 per barrel for the first time and hitting a six-week high. On Tuesday, two oil tankers carrying Saudi crude destined for Asia changed course in the Red Sea after threats of attack by Yemen's Houthi rebels, who are backed by Iran.
Previously, both the U.S. and Iran signaled no immediate willingness to resume talks following the escalation of conflict.
The market worries that if the Middle East situation worsens, rising energy prices could reignite inflationary pressures and influence the Federal Reserve's policy path.
Market observers noted a noticeable decline in shipping activity through the Strait of Hormuz, with several tankers avoiding the Bab el-Mandeb Strait in the Red Sea.
Furthermore, reports indicate that the Caspian Pipeline Consortium has suspended loading and is no longer accepting crude from Kazakhstan due to a tanker attack on a Black Sea terminal.
Analysts at ING stated, "Given the re-emergence of supply disruptions in the Persian Gulf, risks to Saudi crude exports from the Red Sea, and developments in the Black Sea, Brent crude trading just above $91 may be undervalued." The analysts added, "Especially if these supply disruptions persist into August."
U.S. Treasury Yields Hold Near Two-Month Highs
Rising oil prices kept sovereign bond yields and the U.S. dollar near recent highs, as investors also prepared for a large U.S. 20-year Treasury bond auction.
In the bond market, U.S. Treasury yields hovered near approximately two-month highs. The oil price surge continues to fuel inflation concerns, prompting the market to reassess future Fed policy risks.
Investors are also watching demand for the U.S. Treasury Department's $13 billion 20-year bond auction. JPMorgan strategists said, "Considering the currently high absolute yield and reduced valuation support, we believe this auction should be absorbed smoothly."
The European Central Bank (ECB) is expected to announce its interest rate decision on Thursday, while the Federal Reserve will announce its policy decision next week. Markets currently expect both central banks to keep rates unchanged this month.
However, according to London Stock Exchange Group (LSEG) data, traders anticipate that by the end of this year: U.S. rates could rise by at least 25 basis points; Eurozone rates may also increase by at least 25 basis points.
The yield on the German 10-year Bund rose 1.6 basis points to 3.180%. UK Gilts outperformed other European bonds after British inflation data came in below expectations. The UK's headline inflation rate for June fell to 2.6% from 2.8% in May, below the 2.7% expected by analysts in a survey. However, this data had no immediate significant impact on the market.
Dollar Near One-Week High, Yen Revisits 40-Year Low
The U.S. dollar and British pound were largely unchanged overall. The dollar edged lower but remained close to the one-week high hit overnight, which peaked at 101.210. Analysts at Deutsche Bank noted that rising oil prices and higher commodity prices like natural gas are pushing up short-term inflation expectations.
The analysts pointed out, "This backdrop is prompting investors to reprice Fed rate hike expectations, with discussions even resurfacing about a potential hike next week."
Meanwhile, the Japanese yen edged higher. The yen rose against the dollar to around 162.98, after falling to a 40-year low on Tuesday. Previously, sources indicated that Bank of Japan officials are considering raising interest rates faster than economists expect.
As the yen's persistent weakness increases domestic inflation risks in Japan, expectations for a Bank of Japan policy shift are strengthening.
The market is assessing what measures the Japanese government might take to support the persistently weak yen. Japanese Finance Minister Satsuki Katayama said on Wednesday that the government remains prepared to take "decisive action" in the foreign exchange market if needed, but she declined to comment on specific exchange rate levels.
In the cryptocurrency market, Bitcoin fell slightly by 0.8% to $65,870. It had reached a high of $66,919 on Tuesday. Previously, Bitcoin hit a five-week high on Tuesday, prompting investors to take profits.
Naeem Aslam, an analyst at Zaye Capital Markets, said Tuesday's rally was driven by factors including renewed institutional demand, regulatory optimism, and short covering. However, he noted that the escalation of conflict between the U.S. and Iran adds uncertainty to Bitcoin's price.
Reports suggest the U.S. plans to impose new tariffs before Friday, following the expiration of a temporary 10% global tariff.
According to informed sources, U.S. President Trump is preparing to impose new tariffs on products from dozens of economies before Friday. This move aims to ensure the tariff system remains in place after the temporary 10% global tariff expires.
It is understood that the new round of tariffs will range between 10% and 12.5%. Earlier this year, the U.S. Supreme Court rejected Trump's previously implemented global tariff policy, after which Trump imposed a 10% global tariff. Trump's temporary tariff is set to expire on Friday. If a new round of tariffs is implemented then, the White House could avoid a gap between the two.
The plan is not yet finalized and could still change. Reports indicate that with the November midterm elections approaching, Trump's push for the latest proposal would solidify his tariff commitments, despite voter concerns about the cost of living. Critics argue that import taxes increase consumer goods prices, but Trump and other senior officials maintain that tariffs are necessary to rebuild U.S. manufacturing strength and protect domestic industries.
A $1.65 Trillion Off-Balance-Sheet Bomb! The 'Hidden Debt' of Five Tech Giants Soars Eightfold in Four Years.
Could the AI Arms Race Trigger the Next Liquidity Crisis?
The frenzied "arms race" in artificial intelligence (AI) infrastructure by America's five largest tech giants is creating a "hidden debt empire" with a scale far exceeding their reported liabilities.
A recent analysis of the latest earnings report footnotes from Google, Microsoft, Amazon, Meta, and Oracle shows that the combined "hidden debt" accumulated by these five companies through long-term purchase commitments, data center leases, and other means has ballooned to $1.65 trillion. This not only exceeds their officially disclosed liabilities of about $1.35 trillion but has also surged eightfold over the past four years.
This massive scale of off-balance-sheet obligations is causing increasing concern on Wall Street and among global regulators: if AI demand falls short of expectations, these future payment commitments hidden in footnotes could rapidly transform into "debt bombs" that devour cash flow.
Key Stocks in Focus
Super Micro Computer announced preliminary fourth-quarter results, with profitability significantly exceeding market expectations, offsetting the negative of revenue landing at the lower end of the guidance range. Its stock surged about 17%. The rally in Super Micro Computer shares boosted peers in the server sector; buoyed by this better-than-expected preliminary performance, Dell Technologies and Hewlett Packard Enterprise both gained over 4% in pre-market trading.
Software company Pegasystems reported second-quarter results that fell short of Wall Street expectations, with its stock plunging over 14%. Adjusted earnings per share were $0.35, below the consensus estimate of $0.43 from analysts surveyed by FactSet.
Oklo and X-Energy, two nuclear reactor suppliers, will participate in a Trump administration-backed project to accelerate the construction of nuclear power plants compatible with AI data centers. Both stocks rose in pre-market trading. X-Energy gained 4%, while Oklo rose over 3.5%.
Rocket Lab secured a $266 million contract from the U.S. Air Force, sending its stock up 4%. The contract includes 12 suborbital vehicle launch missions, planned for completion by the end of 2028.
Egg producer Cal-Maine Foods reported fourth-quarter results, unexpectedly posting a loss per share of $0.76. Its stock fell over 4.5%. Analysts surveyed by FactSet had expected earnings per share of $0.08. The company attributed the loss to historically low inflation-adjusted egg prices during the quarter.
Despite GE Vernova reporting second-quarter revenue that beat expectations and raising its full-year guidance, its stock fell over 7%. CEO Scott Strazik stated in the announcement that the company's $176 billion order backlog will support continued revenue growth and margin expansion.
AT&T reported mixed second-quarter results, but its stock rose 3%. The company's adjusted earnings per share were $0.65, above the FactSet consensus estimate of $0.59.
Philip Morris lowered its third-quarter earnings outlook, with its stock dipping 0.5%. The company forecasts a Q3 EPS range of $2.20–$2.25, below the analyst expectation of $2.42; its second-quarter profit and revenue both met targets.
CME Group reported second-quarter profit and revenue that exceeded expectations, with its stock rising 1%. CME stated in its announcement that the first half of 2026 marked the company's best first-half performance ever.
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