CNBC Daily Open: Alphabet spends more on AI — but also earns more from it

Investors can have a reputation of being penny pinchers. For one, they tend to push up share prices on layoff announcements because of the associated cost savings. Accordingly, when a company reports slow revenue growth or an increase in spending, it’s more often than not punished in the stock market.

After the bell on Wednesday, Alphabet said it would be spending $85 billion on infrastructure as it expands its artificial intelligence strategy this year. That’s $10 billion more than it forecast in February — which had already overshot the $58.84 billion estimated by Wall Street.

Alphabet said it was raising expenditure because of “strong and growing demand for our Cloud products and services” — of which revenue in the second quarter jumped 32% from a year ago. 

Despite the increased spending — which is no small amount — the Google parent saw its shares rise as much as 3% in extended trading, though it’s pared some of its gains. In other words, investors seem confident — albeit slightly — that the investment in AI can finally be properly monetized and translate into higher revenue.

A penny saved might be a penny earned, but a penny invested properly can be a pound in return.

Donald Trump will visit the U.S. Federal Reserve on Thursday. This is the first time in nearly two decades that an American president will be making an official trip to the central bank, and marks a symbolic move on the Fed’s independence.

Alphabet’s second-quarter earnings beat expectations. However, the Google parent also said that, this year, it would be investing $10 billion more than previously announced in capital expenditures related to artificial intelligence.

Deutsche Bank tops earnings forecasts. Net profit attributable to shareholders reached 1.485 billion euros ($1.748 billion) in the second quarter, compared with a 1.2 billion estimate from Reuters.

The Nasdaq Composite closes above 21,000 for the first time. The S&P 500 and Dow Jones Industrial Average also rose on Wednesday. Asia-Pacific markets mostly climbed Thursday. Japan’s Topix, a broad-based index that tracks all domestic firms, hit a record high.

[PRO] There’s a buzz around ‘neoclouds.’ Investors like these companies, which specialize in artificial intelligence cloud computing, because they’re more cost-effective for clients than traditional hyperscalers. But risks are starting to appear.

Asia is fast becoming a hot spot for private credit as the region’s funding gap widens

The private credit industry is ramping up its focus on Asia-Pacific, drawn by a combination of evolving capital markets and expanding funding gaps as traditional bank lending pulls back.

Private credit assets under management in Asia rose from virtually zero in 2000 to $62.3 billion in the first quarter of 2024, data provided by Pitchbook showed. That expansion has accelerated particularly in recent years, with AUM more than doubling to over $62 billion in 2024 from $34.3 billion in 2017.

— Lee Ying Shan