(July 23): Wall Street traders sent stocks wavering in late hours as they sifted through results from megacaps for clues on whether their massive artificial-intelligence investments are paying off.

A nearly US$800 billion (RM3.27 trillion) exchange-traded fund tracking the S&P 500 churned after the close of regular trading. Alphabet Inc reported cloud revenue that far surpassed expectations and said the division’s backlog of contracted business ballooned to more than US$500 billion. Tesla Inc’s earnings fell short of estimates. In regular hours, equities also fluctuated as worries about an escalation of the Iran war lifted oil prices.

After last week’s selloff in technology stocks, pressure is building for the biggest spenders on AI to justify their expenditures. With scepticism mounting about the hundreds of billions of dollars being poured into data-center development, earnings reports over the next two weeks will be highly scrutinised.

“We remain constructive on AI’s growth story, but we favor a more balanced exposure across the AI value chain — from semiconductors and hardware to megacap tech and more defensive areas of the industry,” said Ulrike Hoffmann-Burchardi at UBS Chief Investment Office. “Investors should also ensure diversification beyond AI.”

Traders continued to monitor geopolitical developments. The US and Iran signaled they aren’t ready to return to the negotiating table after both countries escalated attacks. Brent oil briefly topped US$95, lifting bond yields on concerns about inflationary pressures.

President Donald Trump said the Islamic Republic is “getting hit so hard” following the deaths of four US troops in the past week, but wasn’t yet ready to sign a deal. He earlier vowed to hit Iranian bridges and power plants if Tehran continued attacking vessels in the Strait of Hormuz.

If the US strikes bridges or power plants, “Iran will strike infrastructure and bridges in the region, including energy facilities in which the US has interests,” the semi-official Tasnim news agency reported.

“Diplomatic efforts to end the conflict in the Middle East have effectively stalled as military strikes continue with no sign of easing,” said Ian Lyngen at BMO Capital Markets. “The rally in energy continues to weigh on the Treasury market as hostilities between the US and Iran intensify.”

The escalation in the conflict has raised concerns about higher interest rates. Just a week before the Federal Reserve’s policy meeting, money markets indicate traders see a roughly 30% chance the central bank will hike and a 70% chance it stays on hold.

Uploaded by Isabelle Francis