1. Alphabet Drops on Higher Capex Target

Alphabet (NASDAQ:GOOG) fell around 3% in pre-market trading despite better-than-expected quarterly revenue, as the business increased its full-year AI capex forecast to as high as $205 billion.

“We’re still in a supply-constrained environment”: CFO Anat Ashkenazi justified the extra spend, previously expected in the $180 billion to $190 billion range, because “we are seeing very strong demand both from external cloud customers as well as across the business.”
“Clearly Alphabet is spending big for big results. And Q2 delivered in both ways”: TMF chief investment officer Andy Cross acknowledged the high spend, but took a longer-term viewpoint, saying "Alphabet is spending like the AI opportunity is generational. And signs are pointing that if any company is going to make a good return on its AI investments, it’s Alphabet."

2. Notable After-Hours Movers and Shakers

Tesla (NASDAQ:TSLA) dropped over 4% as quarterly results revealed a 17% fall in adjusted net income, partly due to increasing discounts to boost car sales and lower revenue from regulatory credit sales. Higher capex also weighed on sentiment.
ServiceNow (NYSE:NOW) jumped over 4% as a 24.5% increase in subscription sales helped to boost overall revenue for the quarter. The Team Hidden Gems recommendation also impressed as its AI annual contract value (ACV) crossed the $1 billion mark.
Crown Castle (NYSE:CCI) was little changed after posting a mixed bag of quarterly results. Revenue fell by 4.9% for the Dividend Investor rec, but management raised the full-year adjusted funds from operations (AFFO) midpoint by $5 million.
IBM (NYSE:IBM) was close to flat despite cutting its growth forecast for the rest of the year, with a 42% drop in quarterly mainframe business sales. The Hidden Gems rec did assure investors this is only a temporary downturn for the company overall.

3. Intel, AMD Aim to Lock Down Long-Term Deals

Reuters reports Intel (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD) are committing to longer-term contracts with clients for data-center processors, as tight supply and rising prices continue to worry buyers.

News marks a shift for server CPUs: So far, central processing units (CPUs) hadn’t experienced the same acute shortage as memory chips of AI accelerators, but this appears to be changing as lead times get longer. AMD is outperforming the S&P 500 by 172% since the January 2024 Stock Advisor rec by Team Rule Breakers.
More detail likely with Intel results due after the closing bell: Aside from CPU guidance, investors will be watching the profitability of the foundry business and the extent of any gross margin expansion after a strong previous quarter.

4. Next Up: TSCO & DGX Report Ahead of KNSL

Tractor Supply (NASDAQ:TSCO) fell around 1% after releasing earnings ahead of the market open, as it couldn’t put the disappointing previous quarter to bed. The stock, recommended by Team Rule Breakers and Team Hidden Gems, saw comparable store sales fall by 1.5%, with average transaction count down by 1.7%.
Quest Diagnostics (NYSE:DGX) rose over 5% before the opening bell, with the Team Rule Breakers and Team Hidden Gems rec increasing its full-year guidance as part of strong quarterly results where both revenue and earnings beat expectations.
Kinsale Capital (NYSE:KNSL) reports after the closing bell. The Hidden Gems rec will be hoping the 28.3% drop in premiums last quarter from commercial property eases, as well as more progress on AI initiatives.

5. Today’s Take: The Customer Is Always Right

CrowdStrike (NASDAQ:CRWD)’s gross retention held above 97% the very quarter after the 2024 outage. Loyalty that survives a mistake beats loyalty never tested.

— YASSER EL-SHIMY • TEAM RULE BREAKERS

6. Your Take

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