Return to War and US Big Tech Q2 Earnings

Source: Federal Reserve Board, via FRED, 24/07/2026, US 10-Year Treasury Yield, 02/01/2026-22/07/2026.

Here we see US 10 year treasury yields rising (prices falling) in 2026 so far. The picture around the world is pretty similar. US 10 year yields are up around 0.5% so far in 2026 from 4.2% to 4.7%, UK 10 year gilts have risen from 4.5% to 5.0%, the same Japanese yields have gone from 2.1% to 2.8% in Germany yields have gone from 2.9% to 3.2%.

So far you would have to say Andy Burnham’s appointment has been pretty neutral, UK bond markets are following the world geopolitical story not British politics. 

US Big Tech

On Wednesday evening we saw Q2 results from Alphabet (Google), whose shares fell almost 7% yesterday, and Tesla, whose shares fell 14.5% yesterday.

As predicted in my May update, Elon’s other business SpaceX broke all records in its IPO and lifted off to a 65% gain on its initial IPO price, with Elon becoming the first trillionaire ‘on paper’. The launch quickly ran out of thrust and SpaceX has fallen, 50% at one point and is now some 13% below its IPO value and that’s before the private equity and employee lock-ins start to expire on the 6^th August. With these two declines Elon becomes the first trillionaire to fall back to billionaire status, on paper.

Whilst each of these companies faces differing opportunities and challenges there are a few common themes:

1. Building new technology is incredibly expensive
2. Getting to a profitable business in a new technology can take much longer than you think
3. When companies undertake material capital expenditure, how those get accounted for and particularly the speed with which capital assets are written down can have a big impact on profits. Does the cash spend generate more revenue and how long will that revenue last before more cash needs to be spent to maintain it? Is it capital expenditure or just increased recurring costs?
4. When large amounts of cash are needed to keep competing, more than is covered by current cash flow, it is inevitable existing shareholders will get diluted through additional equity issues to raise cash or leveraged up with bonds making the business riskier

Alphabet’s revenue and profit increases beat Wall Street expectations, but its capital expenditure is still rising beyond initial estimates and for the first quarter in 20 years Alphabet spent more cash than it generated. Alphabet burnt through $6bn in cash in Q2. These big cap US tech companies have flipped from being high margin, capex light to needing high capex and no one yet knows what ultimate profit margins in the AI world will be. 

Alphabet just completed a massive fund raise through new shares and preference shares, raising $84bn and diluting current shareholders. Will it be enough?

Just twelve months ago Elon promised that Tesla’s robotaxis would be available to ‘half the population of the US by the end of 2025’. That’s to 170 million people. As recently as October 2025 Elon suggested he would have as many as 1,500 robotaxis operating in his Texas trial areas by the end of 2025. According to website Electric-Vehicle.com that figure at the end of 2025 was more like 170, with most robotaxis still having a human supervisor on board. This week Elon pushed any expectation of substantial revenues from robotaxis out into 2027.  A huge gap between talked up expectations and reality.

The impact here is that the US big tech – the Magnificent 7 – mostly all spenders in the AI race and with substantial representation in indices based on market cap weightings, are now clearly dragging down equity indices rather than pushing them up.