Stocks Jump to a Record as Alphabet’s AI Spending Pays Off; Tesla Slides on Margins, With Flash PMIs Ahead

Georgi Kuzmanov Senior Equity Analyst & Founder Columbia MSFE · 13+ years equity research

The AI trade got the confirmation it was waiting for. Alphabet reported after Wednesday’s close, and it delivered on the one line that mattered: it beat on earnings, reported accelerating Google Cloud revenue, and raised its capital-spending plan yet again, citing demand for artificial-intelligence infrastructure that outstrips supply. That is the demand-side proof to match the supply-side signal TSMC gave a week ago — the customers are spending what the foundry says they are ordering. The stock jumped roughly 6% in premarket trading, and because of its index weight, it is dragging the whole market up with it: S&P 500 futures are up about 0.6%, Nasdaq 100 futures 0.9%, both pointed at fresh records.

The other half of the marquee pairing went the other way. Tesla fell about 6% after its automotive gross margin excluding regulatory credits came in soft, the familiar gap between a narrative of robotaxis and energy storage and the harder reality of a core car business still under price pressure. The split is instructive: the market rewarded Alphabet for spending that is visibly converting into cloud revenue, and punished Tesla for a future that its current margins do not yet fund. This was a referendum on which megacap stories are backed by numbers, and it delivered a clear verdict.

Now the tape has to clear one more hurdle before it can celebrate. At 9:45 a.m., July’s flash purchasing-managers surveys land — the first read on business activity captured entirely after the tariff agenda widened to the European Union and Mexico. The composition matters more than the headline: strong new orders with contained price components would let the record run extend, while a jump in input prices would revive the tariff-inflation worry that GM’s guidance flagged on Tuesday.

Pre-Market Snapshot

Overnight Developments

Alphabet raises capex again as cloud accelerates

Alphabet’s report was the cleanest possible confirmation of the AI-infrastructure thesis. Google Cloud revenue growth accelerated, its operating margin expanded, and management lifted full-year capital-expenditure guidance for the second time this year to meet demand it described as capacity-constrained. Crucially, the spending is visibly converting into revenue rather than sitting as a promise — the precise distinction the market has been demanding since Netflix and Texas Instruments punished merely adequate outlooks. The read-through lifted the whole AI complex, with Nvidia, Broadcom and the semiconductor names rallying on the confirmation that the orders are real.

Tesla slides as the margin story disappoints

Tesla’s report was the mirror image. Deliveries were roughly as expected, but automotive gross margin excluding regulatory credits — the honest measure of the core business — came in below hopes, and management’s commentary leaned on robotaxi timelines and energy-storage growth rather than the profitability of selling cars today. The shares fell about 6%, dragging on the consumer-discretionary sector even as the broad market rose. It is the recurring Tesla pattern: an ambitious future narrated over a present the numbers do not yet support.

Flash PMIs are the day’s macro test

The one scheduled event that can interrupt the rally is the July flash PMI release at 9:45 a.m. Manufacturing is seen near 51.5 and services near 53.0, both still in expansion, but the sub-indices carry the signal: new orders for the demand trajectory, and input and output prices for evidence that tariff costs are being absorbed or passed on. Weekly jobless claims at 8:30, expected near 240,000, and June new home sales at 10:00 round out a calendar that is otherwise deferential to earnings.

Global Markets

Global equities rode the Alphabet halo higher. In Asia, Taiwan’s Taiex jumped about 1.4% as the AI-chip read-through lifted the foundry complex, South Korea’s Kospi gained 1.0% on Samsung and SK Hynix, Japan’s Nikkei 225 rose 0.7% to near 73,540, China’s Shanghai Composite firmed 0.3% to around 4,200, and Hong Kong’s Hang Seng added 0.6% to near 24,510. The confirmation that AI demand is real was the single clearest driver across the region.

Europe opened firmer, with technology leading and the flash PMIs the local focus as well. ASML and the chip-equipment names climbed on the Alphabet capex signal, lifting Germany’s DAX about 0.5% to near 25,720, France’s CAC 40 0.4% to around 8,660, and the Euro Stoxx 50. Britain’s FTSE 100 added 0.3% to about 10,830. Euro-area flash PMIs released earlier were broadly stable, a reassuring backdrop into the U.S. prints.

Macro and Rates

The bond market firmed modestly in yield on the risk-on tone. The 10-year Treasury yield edged to about 4.35% and the 2-year to near 4.02%, leaving the 2s/10s spread at a positive 33 basis points. A confident equity market at record highs pulls a little capital out of the safety of Treasuries, but the move is marginal, and the cool June inflation data plus the Fed’s on-hold stance keep the curve well anchored. Today’s flash PMI price components are the one thing that could move rates, and only if they surprise clearly to the upside.

The dollar was steady near 99.0 on the ICE index, gold eased to $4,145 as the haven bid softened further, and crude held near $69.30 for WTI. Bitcoin firmed above $72,000, extending its record run. The cross-asset picture is textbook risk-on — higher equities, firmer yields, softer gold, steady dollar — and it reflects a market that just received the single most important earnings confirmation of the season.

Corporate News

Earnings & Analyst Actions

• Alphabet (GOOGL): Beat and raised capex again as Google Cloud growth accelerated; shares up about 6% premarket, with a wave of price-target increases.
• Tesla (TSLA): Fell about 6% on soft automotive gross margin excluding credits, the core-business metric the market cares about.
• IBM: Rose on stronger-than-expected software revenue and solid consulting bookings, a constructive read on enterprise technology spending.
• Semiconductors: Nvidia, Broadcom and the AI-exposed names rallied on the Alphabet capex confirmation; the analog group stabilized after Tuesday’s TI-driven drop.
• Today’s reporters: Intel headlines after the close, with Honeywell, Union Pacific and the airlines reporting before it.

Premarket Movers

Economic Calendar

The AlphaEdge Prediction

The path of least resistance is a gap to a fresh record at the open, powered by Alphabet and the AI complex, with the flash PMIs the swing factor for whether the market holds those gains into the close. Expect technology and communication services to lead, consumer discretionary to lag on Tesla, and the breadth of the move to hinge on whether the industrials confirm or the PMI prices disappoint.

Base case: The S&P 500 opens through 7,742 and trades a 7,770–7,810 range, closing at a record with megacap technology leading and a benign PMI keeping yields anchored.

Bull case: A firm services PMI with contained prices adds a macro tailwind to the Alphabet-led rally, sending the index decisively above 7,800 toward 7,850 as the AI trade’s confirmation broadens.

Bear case: A hot PMI prices component lifts the 10-year toward 4.45%, fades the megacap gap, and pulls the S&P back toward 7,720 as tariff-inflation fear resurfaces just as Intel looms after the close.

Alphabet gave the AI trade exactly what it needed — capital spending that is visibly converting into accelerating cloud revenue — and that demand-side confirmation is enough to gap the S&P 500 to a fresh record above 7,742, even as Tesla’s margin miss shows the market is still pricing on numbers rather than narrative; the only obstacle left today is the 9:45 flash PMIs, so watch the prices sub-index for tariff pass-through, and lean with a rally that has finally earned its record.

Georgi Kuzmanov

Senior Equity Analyst & Founder at AlphaEdge. Columbia University MSFE (2011–2013). Covering equities, macro, and geopolitics for serious investors.