Google and Tesla Boost Capex: 8 Key Items Shaping the Stock Market Thursday

These are the early headlines and other items poised to influence the market at the start trading Thursday. As we share this collection of market drivers, U.S. equity futures point to a weak start to the trading day.

1.Yemen’s Houthi militia attacked two Saudi Arabian oil tankers in a military operation, the group said on Thursday, and a Saudi news agency later confirmed one of the two vessels was ablaze after an assault while sailing in the Red Sea. (Reuters) The U.S. is surging forces, medics and weaponry to the Middle East to give President Trump more muscular military options as he considers expanding the conflict against Iran, according to people familiar with the matter. (WSJ) U.S. Secretary of State Marco Rubio told a diplomatic gathering in Southeast Asia the price Iran pays “will get higher every night” until Tehran is ready for a peace deal it would live by. (Reuters)

While we remain hopeful for an eventual settlement, all signs point to further escalation between the U.S. and Iran and that is taking a toll on traffic through the Strait of Hormuz and oil prices…

2. Oil prices are racing back toward $100 this morning after Tehran-backed Houthi militants claimed attacks on two Saudi tankers in the Red Sea, threatening another important route for oil flows and stoking fears that the U.S.-Iran conflict could escalate further. (WSJ)

It’s not just oil prices, though. Gas prices have also rebounded to more than $4 per gallon, placing them up ~30% year over year, per the latest data from AAA. This has us girding for signs of renewed inflation pressure in tomorrow’s Flash July PMI data from S&P Global. While the Fed is in its latest blackout period ahead of next week’s policy decision, we will be leafing through comments from European Central Bank President Christine Lagarde today and its Chief Economist Philip Lane tomorrow. We’ll be looking for clues as to what the Fed’s tone is likely to be given rebounding inflation pressures.

3. Alphabet reported blowout earnings results late Wednesday, but the stock is dropping after the search giant again raised its forecast for capital expenditures… Google Cloud revenue grew 82% from the prior year to $24.8 billion; analysts had estimated 63% growth. Investors have been looking for accelerating revenue in Big Tech’s cloud segments for proof that customers are spending on AI services… During its earnings call with investors, Google said it now expected to spend between $195 billion and $205 billion on capex, compared with its prior guidance of $180 billion to $190 billion. (Barron’s)

There were many positives inside Alphabet’s (GOOGL) earnings report last night, including the top and bottom-line beat, the revenue and margin results for Google Cloud, Google Cloud’s backlog growing by more than $50 billion sequentially to $514 billion, and the number of monthly active users of its Gemini app crossing the 950 million mark with daily active users tripling in the last year.

Those positives were offset by the capex increase discussed above, the company posting negative free cash flow in the reported quarter, and the comment from CFO Anat Ashkenazi that “free cash flow will remain under pressure driven by our investments in technical infrastructure, which enable us to capitalize on the AI opportunity and continue to drive attractive returns”… As much as Google is reaping the benefits of AI adoption, it remains in investment mode. We’ll have more to say in a stand-alone Google note later this morning.

4. Tesla just told investors it plans to spend more than $25 billion on capital expenditures in 2026. That number, dropped during the company’s Q1 earnings call, is not a typo. It represents one of the most aggressive investment pivots in the company’s history. For context: Tesla spent roughly $8.53 billion on capex in 2025. (Crypto Briefing) A year ago, Tesla CEO Elon Musk said the company’s robotaxi network would expand at a “hyper-exponential rate” and be available to half the population of the U.S. by the end of 2025. On Wednesday’s earnings call, Musk and his ‌executive team struck a more guarded tone as they fielded analysts’ questions about a slower-than-expected rollout. (Reuters)

That massive upswing in Tesla’s (TSLA) capex, which will be weighted more toward H2 2026, signals the AI race continues, especially given management’s earnings call comment that…

“CapEx will grow for the next two to three years as we expand our robotaxi fleet, expand our production capacity for Optimus, make investments for semiconductor fab, install solar manufacturing capacity and AI compute infrastructure in addition to all the other expansions we’ll do for other manufacturing for automotive.“

This will foster more questions about cash flow and the need to raise additional capital. Following the comments from both Google and Tesla, the odds that we will hear similar comments from Amazon (AMZN), Microsoft (MSFT), and Meta (META) are rising sharply. Confirmation of that will likely weigh on their shares, with the degree of pressure being influenced by what each company shows on the AI monetization front. We’ll touch more on that in our forthcoming Alphabet note.

5. Advanced Micro Devices is set to launch a raft of AI hardware that will rival Nvidia on Thursday at an event at a downtown convention center in San ‌Francisco. AMD is attempting to capture market share from Nvidia in the fast-growing data center chip sector, especially for so-called inference computing, which is the data crunching that occurs when a user queries a chatbot such as OpenAI’s ChatGPT. (Reuters)

Hardly a surprise given the demand we are seeing for AI and data-center chips, and that makes the announcement and its particulars one we’ll review closely. As with think about this move by Advanced Micro Devices (AMD), we’ll look to connect the dots to one of Neostellar Capital’s (NSLR) portfolio companies, TensorWave. As a reminder, TensorWave is an AMD-exclusive AI Cloud. On June 10, TensorWave completed a $350 million capital raise that valued the company at $1.55 billion and was led by Neostellar partner Magnetar and AMD Ventures.

6. United Rentals said it will increase its spending on fleet this year after reporting a 12% increase in second quarter revenues and raising its full-year guidance. CapEx guidance for the year has risen 10% compared to its previous outlook… Matthew Flannery, United’s CEO, said growth had accelerated in the quarter, with customers remaining optimistic, particularly around large projects. “Looking ahead, I am very pleased that we are again raising our guidance for the year, supported by the tailwinds we see across large projects, customer backlogs, and the momentum witnessed year-to-date”… (International Rental News)

Portfolio holding United Rentals (URI) delivered a beat-and-raise quarter last night, and that is sending its shares higher this morning. After we digest the company’s earnings call that is being held this morning, we’ll have more in depth comments to share, and more than likely we’ll be re-assessing our current $1,100 price target for URI.

7. Economic data today per TipRanks: Chicago Fed National Activity Index (June), Initial & Continuing Jobless Claims (Weekly), EIA Natural Gas Stocks (Weekly).

8. Companies reporting today per TipRanks: AM – Albertsons (ACI), American Airlines (AAL), Ameriprise (AMP), Blackstone (BX), Cleveland-Cliffs (CLF), Comcast (CMCSA), Dow (DOW), Honeywell (HON), IMAX (IMAX), Lazard (LAZ), Lockheed Martin (LMT), Mobileye (MBLY), Nokia (NOK), Norfolk Southern (NSC), STMicroelectronics (STM), T-Mobile (TMUS), Visteon (VC). PM – Boston Beer (SAM), Comfort Systems (FIX), Deckers Outdoor (DECK), Digital Realty Trust (DLR), Intel (INTC), Sallie Mae (SLM), SAP SE (SAP).