Big Tech Earnings Ignite AI Stock Rally
A flurry of blockbuster earnings from tech giants sent AI-linked stocks swinging. Microsoft reported strong results and briefly surpassed a $4 trillion market cap on July 31, becoming only the second public company ever to hit that milestone (after Nvidia) reuters.com. Microsoft’s shares jumped about 3.5% as its Azure cloud growth and upbeat guidance “quickly silenced any doubts about cloud or AI demand,” according to one market analyst reuters.com. The company revealed Azure pulled in $75 billion last year and touted over 100 million users for its new AI Copilot tools reuters.com – evidence that its massive AI investments are paying off. In fact, Microsoft plans to spend a record $30 billion on data centers this quarter to meet surging AI service demand reuters.com, outspending rivals as it doubles down on AI. This boosted confidence that “Microsoft is more than justifying its spending” in the AI race reuters.com.
Meta Platforms delivered an even bigger surprise. The Facebook parent’s stock skyrocketed 11.3% to a record high after a “solid” Q2 earnings beat and AI-driven growth in its core ad business reuters.com investopedia.com. Meta added nearly $200 billion in value in one day reuters.com as CEO Mark Zuckerberg touted how AI improvements are boosting engagement and ad targeting. The company did warn that its scramble to catch up in the “Silicon Valley AI race” will require heavy spending – Meta hiked its 2025 capital expenditure budget to as much as $72 billion reuters.com and signaled 2026 costs may grow even faster due to AI investments. But booming ad revenue is supporting these massive outlays reuters.com. “The big boys are back,” said one portfolio manager, noting that robust AI-fueled results from Microsoft, Meta and others prove “the Magnificent Seven is still magnificent” reuters.com. Not long ago investors fretted over Big Tech’s “shockingly high” AI spending, but as one analyst observed, strong core businesses are buying time and providing confidence that the billions spent will be worthwhile reuters.com.
Alphabet (Google) likewise beat sales forecasts and raised its annual spending target by $10 billion to $85 billion reuters.com, reflecting hefty investment in AI infrastructure. Its stock, however, slipped about 2% on July 31 amid a late-session tech dip investopedia.com – perhaps some profit-taking after a strong run. Google highlighted that its new Gemini AI assistant already reaches over 450 million monthly users, while OpenAI’s ChatGPT (backed by Microsoft) has ~500 million weekly users reuters.com. These user numbers underscore how rapidly generative AI adoption is scaling across platforms.
Amazon also rode the AI wave but didn’t escape investor scrutiny. Its stock rose ~1.7% in regular trading July 31 ahead of earnings, then plunged over 7% after hours when results hit reuters.com reuters.com. Ironically, Amazon posted better-than-expected revenue ($167.7 billion, +13%) and an upbeat Q3 sales outlook, and CEO Andy Jassy hailed “our AI progress across the board” in improving customer experiences investopedia.com investopedia.com. The disappointment lay in Amazon Web Services – cloud growth of 18% lagged far behind the “big momentum” seen at Azure and Google Cloud investopedia.com. After its rivals’ blowout cloud numbers, AWS’s merely good results weren’t enough; as Jefferies analysts noted, AWS growth was “disappointing” relative to peers investopedia.com. By Aug 1, Amazon’s stock was trading ~7% lower in Europe reuters.com, even as the company’s forecast for next quarter topped expectations. The message: in an AI-fueled cloud boom, falling short of rivals’ high bar can punish stock prices.
Finally, Apple – not traditionally grouped with “AI stocks” – quietly benefited from the tech rally. Its fiscal Q3 report (released July 31) beat expectations, with iPhone sales surging, and Apple projected surprisingly strong revenue ahead despite headwinds reuters.com. Shares ticked up about 3% after-hours reuters.com. More notably, CEO Tim Cook used the earnings call to make a bold AI pronouncement: Apple is “ready to open its wallet” and ramp up spending to catch up in AI reuters.com. Cook signaled a departure from Apple’s frugal past – saying the firm will invest heavily in AI/data centers and is even open to acquiring larger AI companies if needed reuters.com reuters.com. Apple has already snapped up seven small AI startups this year, and “we’re very open to M&A that accelerates our roadmap,” Cook said reuters.com. He hinted Apple might re-imagine core products like the Safari browser with AI, and a Bloomberg report even suggested Apple discussed buying AI search startup Perplexity reuters.com. While no immediate deal is on the table, Apple’s message was clear: it won’t be left behind in the AI race. Investors responded positively – Apple’s Frankfurt-listed shares rose 1.5% on Aug 1 following its bullish forecast and AI ambitions reuters.com, despite management warning that new U.S. import tariffs will cost Apple $1.1 billion in the coming quarter reuters.com.
Chip Stocks: Record Highs Meet Reality Checks
Even as software giants soared, AI hardware stocks saw mixed fortunes. After an incredible year-to-date rally, Nvidia shares took a breather, dipping around 0.8% on July 31 reuters.com. Traders rotated out of some chip names despite Nvidia’s status as the premier AI chip supplier (its market cap had previously vaulted above $1 trillion on AI enthusiasm, even touching $4 trillion briefly in 2025 reuters.com). Broadcom, which supplies AI networking chips, fell about 2.9% reuters.com. These declines helped pull the Philadelphia Semiconductor Index down 3.1% – its worst drop since April reuters.com. One strategist observed a clear split in tech: “the haves and have-nots.” Mega-cap AI platform owners were “doing really well” while many semiconductor and equipment stocks “are doing pretty poorly” in this moment reuters.com. It appears investors took some profits in chipmakers, which had run up on AI hype, and reacted to a few disappointing chip earnings and geopolitical worries.
One drag on the sector was Qualcomm, which reported results and saw its stock slide ~6–8% by July 31 investopedia.com. The mobile chip giant showed 10% revenue growth and touted gains in automotive and IoT segments (including a deal to supply Meta’s smart glasses) investopedia.com. But parts of its report underwhelmed – its outlook was merely in-line and it faces the loss of Apple’s modem business in coming years investopedia.com. That, plus ongoing smartphone weakness, left Qualcomm shares in negative territory for 2025 after this drop investopedia.com. Similarly, Arm Holdings – the UK-based chip designer whose IPO was a 2023 AI darling – delivered a reality check. Arm’s U.S.-listed stock plunged 13% on July 31 investopedia.com after it issued a weaker-than-expected forecast and revealed a strategic shift to invest in making its own chips reuters.com reuters.com. The company will pour a chunk of its profit into developing “finished” Arm-based semiconductors (even chiplets and full-fledged processors), a move aimed at new revenue but one that “may not result in a product” and could “eat into…profit” for years reuters.com reuters.com. Arm’s CEO confirmed the plan to build sample chips – a departure from its pure IP-licensing model – but declined to give details or timelines reuters.com. Investors weren’t thrilled; the strategy could pit Arm against its own customers like Nvidia reuters.com and raises execution risks. Combined with Arm’s soft profit outlook (amid global trade tensions denting smartphone demand) reuters.com reuters.com, this news erased much of Arm’s recent AI-fueled stock gains.
Meanwhile, AMD – Nvidia’s chief rival in AI accelerators – had no major news on these two days, but its stock has been on a tear (up ~50% YTD) on optimism for its upcoming AI chips ainvest.com. Analysts at BofA just raised AMD’s price target, predicting new AI GPU shipments in H2 2025 could add up to $1 billion in revenue finance.yahoo.com. Still, AMD shares drifted modestly lower into early August, as investors await its earnings and proof it can claw into Nvidia’s dominance tipranks.com.
Even Tesla, often seen as an “AI story” because of its self-driving tech and humanoid robot vision, wasn’t immune to the tech rotation. Tesla’s stock fell about 3% on July 31 investopedia.com, giving back some gains after a strong July. There was no major Tesla-specific AI announcement – the pullback seemed mostly due to profit-taking and sector moves. (Tesla’s Q2 earnings earlier in July showed healthy margins but Elon Musk’s AI projects like the Dojo supercomputer remain longer-term factors.) The takeaway: after an exuberant run, hardware-centric AI stocks paused or stumbled as investors sorted hype from reality. Many chip names are still up dramatically in 2025 on AI optimism, but they faced a bout of volatility while the spotlight shifted to the immediate AI payoffs in software and cloud.
AI Contracts and M&A: Palantir’s Army Windfall & Cybersecurity Mega-Deal
It wasn’t only earnings making headlines – big AI-related deals grabbed attention as July turned to August. On July 31, the U.S. Army announced a landmark enterprise agreement with Palantir Technologies, the data analytics and AI software firm. The Army is consolidating dozens of existing contracts into one deal, giving it the option to purchase up to $10 billion in Palantir products over the next 10 years reuters.com. This umbrella contract doesn’t guarantee orders, but it streamlines procurement and locks in volume discounts for Palantir’s platform reuters.com. The goal is to deploy AI-powered data integration tools faster across the Army reuters.com – essentially treating Palantir as a strategic supplier for military AI needs. The news reinforced Palantir’s status as a premier AI contractor to governments. Its stock – already one of 2025’s top-performing “AI stocks” with over 100% gain YTD – is expected to react positively as investors see a pipeline for long-term federal revenue. Palantir’s CEO Alex Karp has often touted demand for the company’s AI-driven software in defense, and this massive deal (even as an ordering vehicle) underscores that point.
Another blockbuster came in cybersecurity. Palo Alto Networks, a global cyber defense company, unveiled a $25 billion deal to acquire CyberArk Software on July 30 reuters.com. CyberArk is an Israeli firm specializing in identity security (protecting privileged accounts), a niche that’s increasingly critical as AI-driven cyber threats rise reuters.com reuters.com. Palo Alto’s CEO said the rise of AI and “explosion of machine identities” means security must ensure every digital identity has proper controls reuters.com. By buying CyberArk, Palo Alto aims to offer that identity protection and capitalize on surging demand from companies worried about AI-enabled attacks reuters.com reuters.com. The $25B price tag marks Palo Alto’s biggest acquisition ever, part of a consolidation wave in cybersecurity (Google’s cloud arm bought security startup Wiz for $32B earlier in the year) reuters.com. Palo Alto’s stock initially fell ~8% on the news as investors fretted about integrating such a large purchase reuters.com reuters.com – a departure from Palo Alto’s usual bite-sized deals. Analysts noted it’s “unknown territory” for the company to swallow a target of this scale reuters.com, but longer-term it fills a critical gap (Palo Alto lacked an identity-security offering) and could boost its growth trajectory in safeguarding AI systems reuters.com reuters.com. CyberArk’s shareholders, meanwhile, get a hefty premium (29% above pre-news price) reuters.com. This acquisition highlights how AI is driving industry shake-ups: as AI expands the threat landscape, cybersecurity providers are merging to build one-stop platforms. Global cyber spending is forecast to rise 12% in 2025 thanks to AI-fueled threats reuters.com, so more deals may follow. Palo Alto’s bold move suggests incumbents won’t hesitate to spend big to stay ahead of emerging AI risks.
In other partnership news, reports surfaced that OpenAI and Microsoft are renegotiating aspects of their landmark partnership (Microsoft invested billions in OpenAI’s ChatGPT). According to Bloomberg, Microsoft is in advanced talks to ensure it retains access to OpenAI’s latest innovations even if OpenAI pursues an IPO down the road cloudwars.com. OpenAI’s growth has both sides exploring adjustments – potentially allowing OpenAI to seek new funding or go public around 2026+, while Microsoft secures rights to any advanced AI models that emerge alphaspread.com startupnews.fyi. This story, which emerged in late July, underscores the balancing act between Big Tech and hot AI startups. Microsoft wants to “continue to benefit” from OpenAI’s breakthroughs, and OpenAI wants flexibility for the future cloudwars.com. No immediate market impact was noted, but it’s a reminder that behind the scenes, AI alliances are evolving amid the technology’s rapid progress. We may see more such partnership recalibrations – or even outright acquisitions – as tech giants position for the next phase of AI development.
Global & Regulatory Developments in AI
Regulators worldwide are racing to catch up with the AI boom, and late July saw several notable actions. In Europe, Italy’s competition authority launched an investigation into Meta Platforms on July 30 over the integration of an AI chatbot into WhatsApp reuters.com. The watchdog (AGCM) alleges Meta may have abused its dominant position by automatically installing its “Meta AI” assistant in WhatsApp without sufficient user consent reuters.com. The concern is that bundling AI features into the popular messaging app could unfairly crowd out rival AI services – effectively “steering” Meta’s huge user base toward Meta’s own AI ecosystem reuters.com reuters.com. Meta denies wrongdoing, noting it offers the AI assistant for free “in a place [users] already know and trust” (WhatsApp) reuters.com. The probe is at an early stage, but it highlights how European regulators are intensifying scrutiny of Big Tech’s AI deployments. It also comes just weeks after the EU reached a provisional agreement on an AI Act to regulate AI systems – part of a broader policy push. In fact, Alphabet’s Google agreed to sign the EU’s voluntary AI Code of Practice even while voicing some concerns reuters.com. Europe’s message is clear: AI must develop under fair competition and safety guardrails, and big platforms leveraging AI will face watchdogs.
In the U.S., the policy backdrop for AI is evolving as well. The Biden-era export controls on advanced AI chips have been revisited under the current administration. In a twist, July saw the White House consider easing certain AI chip export restrictions – potentially allowing Nvidia and others to resume some sales to markets like China whitehouse.gov. However, President Trump simultaneously unveiled an “AI Action Plan” aiming to secure America’s tech lead, which includes new measures to block AI chip exports to adversaries (though details remain scant) reuters.com techcrunch.com. This policy whiplash is creating uncertainty for semiconductor firms. Notably, Arm’s CEO cited “global trade tensions” and tariff battles as a threat to chip demand in coming quarters reuters.com reuters.com. Indeed, U.S.–China tech frictions loomed large over markets around Aug 1: the U.S. was set to impose higher tariffs on certain imports, and China has hinted at retaliating. Such geopolitical cross-currents can hit AI supply chains – for example, any renewed ban on exporting Nvidia’s A100/H100 chips would hurt its sales. For now, investors seem focused on the short-term AI opportunities more than macro risks, but that could change with a single regulatory announcement.
Elsewhere globally, governments are investing to not fall behind in the AI arms race. In France, the state took steps to bolster domestic AI capability – formally offering €410 million to acquire Atos’s advanced computing division, which includes its high-performance computing and AI units reuters.com. This deal (expected to close in 2026) would effectively nationalize key AI and supercomputing assets, ensuring France retains strategic control in these technologies reuters.com reuters.com. It’s a notable example of industrial policy in the AI era. And in Asia, while stock markets mostly reacted to U.S. tech earnings, there’s growing momentum in AI as well – for instance, Chinese tech giants like Baidu and Alibaba are accelerating AI model rollouts (encouraged by reports of possible U.S. export relaxations). Asia’s AI sector did face a hiccup this week as weak global demand and tariff uncertainty hit business confidence reuters.com, contributing to a slide in regional stocks. But companies and governments alike remain incredibly focused on AI as a growth engine.
Finally, the expert commentary across markets underscores a key theme: AI is now central to investment narratives. We’ve seen investors reward those “spending big” on AI – evidenced by over $500 billion in combined market cap added to Microsoft and Meta after their earnings reuters.com. Initially, there were doubts about costly AI bets, but as one analyst put it, these results “silence any doubts” that the AI boom is real reuters.com. From advertising and cloud computing to chipmaking and cybersecurity, virtually every sector is being reshaped by AI, and stocks are moving in real-time with each development. With U.S. indices at or near record highs (the Nasdaq just notched its third straight monthly gain reuters.com reuters.com), AI remains a primary catalyst. Of course, risks abound – lofty valuations, regulation, and international tensions – which means volatility will likely persist. But for now, the AI gold rush in equities shows little sign of cooling: massive earnings beats, ambitious deals, and aggressive investments in AI are being cheered by the market reuters.com, as investors bet that these new technologies will unlock the next leg of growth. The first days of August made one thing clear: in 2025’s stock market, AI is the headline act.
Sources: Reuters, Investopedia, Yahoo Finance, Bloomberg.
