Alphabet and Tesla declines weigh on US futures as oil rises

U.S. stock futures were under pressure Thursday as Alphabet shares fell 6% after the company outlined plans for higher artificial intelligence spending, according to CNBC’s Jim Cramer. He also pointed to U.S. crude above $90 a barrel, Brent briefly above $100 and higher bond yields as additional headwinds for equities.

Alphabet’s decline has broader index implications because the company is now one of the 30 stocks in the Dow Jones Industrial Average, Cramer said. The move followed a quarter he characterized as solid but short of a clear positive surprise.

AI spending tests investor patience

Alphabet reported 82% revenue growth at Google Cloud, Cramer said, but investors focused on the company’s higher capital expenditure plans. The issue for the market is timing: large AI infrastructure investments can depress margins before companies show how the spending turns into durable revenue.

Wells Fargo analysts viewed the higher spending as constructive over time, according to Cramer, while also acknowledging that it could pressure margins in the near term. JPMorgan strategist Michael Cembalest also raised concerns about the current earnings season, contrasting strong free cash flow among semiconductor suppliers with weaker evidence that hyperscale customers are monetizing AI investments.

Cembalest described semiconductor companies as the “caboose” and hyperscalers as “the front end of the train,” according to Cramer. His argument adds to scrutiny of whether cheaper AI models may reduce the value of owning companies that consume large amounts of AI infrastructure.

Earnings reactions hit major technology names

Tesla shares dropped more than 9% after the company missed quarterly earnings expectations while revenue came in ahead of forecasts, Cramer said. He said the company did not provide enough detail on robotaxis and robots as it shifts emphasis away from electric vehicle sales. Cramer also repeated his view that Tesla should merge with SpaceX, noting that both companies are led by Elon Musk.

IBM shares were down 2.5% after the company cut guidance following an earnings warning the prior week, according to Cramer. Reported revenue and earnings matched the earlier preannouncement, which had already weighed on the stock.

ServiceNow moved 2.5% higher after posting better-than-expected results. Cramer said Nvidia Chief Executive Jensen Huang favors ServiceNow for moderating software-as-a-service systems. ServiceNow Chief Executive Bill McDermott told CNBC’s “Mad Money” that the company has a kill switch intended to stop rogue AI agents, following an incident involving an OpenAI agent in a cybersecurity test this week.

Morgan Stanley raised its Apple price target to $364 from $360 and kept a buy rating, according to Cramer. The bank’s analysts said Apple’s fundamentals remain strong, but with the stock near record highs ahead of earnings, they said the company needs “zero blemishes across the board” for the shares to keep rising.

Industrials split and Lilly advances obesity drug plans

Honeywell Technologies shares rose 2.5% after its first report since the spinoff of Honeywell Aerospace, Cramer said. He cited revenue and earnings beats on the remaining HON business, a higher full-year earnings outlook and 16% organic order growth, including strong Middle East bookings tied to liquefied natural gas customers.

Dover fell 8% after a mixed quarter. Cramer said sales were slightly below expectations, while operating margin and earnings topped estimates. Orders increased, and the company raised its full-year organic growth guidance, with a conference call scheduled for 9:30 a.m. ET.

Eli Lilly plans to seek regulatory approval in 2027 for retatrutide, its next-generation obesity drug, CNBC reported. The company said the injectable treatment, which acts on GLP-1, GIP and glucagon hormones, cleared two late-stage trials with substantial weight loss and improved glycemic control. Lilly told CNBC it needs additional time to verify manufacturing and quality-control data before filing with regulators.

This story draws on original reporting from CNBC.