Tech giants report earnings amid AI spending concerns

PARAGRAPH 1 --- What happened: Tech giants Amazon, Alphabet, and Microsoft reported strong Q2 earnings, driven by robust AI demand and cloud growth. Microsoft and Alphabet doubled their capex spending, while Amazon raised its 2026 capital expenditure to $220 billion. Despite increased spending, Microsoft maintained positive free cash flow, while Alphabet reported its first-ever negative free cash flow quarter. SpaceX's earnings call highlighted AI spending concerns, with investors worried about the sustainability of its profitable Starlink business bankrolling data center investments.

PARAGRAPH 2 --- Market impact: The tech sector, particularly cloud and AI-focused companies, saw a significant market value increase following these earnings reports. Microsoft gained over $600 billion, while Amazon and Alphabet each added around $500 billion. Investors' concerns about AI spending were alleviated, leading to a repricing of tech stocks. However, some analysts caution that venture capital portfolios, such as stakes in Anthropic and OpenAI, are distorting corporate earnings.

PARAGRAPH 3 --- What to watch next: Investors should closely monitor the upcoming Q3 earnings from these tech giants to assess the sustainability of their AI spending and growth. Key dates include Microsoft's Q4 earnings on October 24 and Amazon's Q3 earnings on October 27. Additionally, the evolution of AI-related regulations and any updates on the tech companies' AI partnerships and investments will shape this narrative moving forward.