Alphabet boosts AI investment by billions as markets react to trade tensions
- Asian shares fell after Wall Street reached new highs, influenced by Alphabet's positive earnings and AI investments.
- Japan's Nikkei 225 index declined by 0.7% as inflation data showed a slight decrease in Tokyo for July.
- Ongoing uncertainties in trade relations are creating market volatility, impacting both Asian and U.S. stocks.
On Friday, July 25, 2025, Asian stock markets experienced a downturn as Wall Street reached new record highs, driven by gains from Alphabet and artificial intelligence stocks despite the significant decline of Tesla, an electric vehicle manufacturer. Japan's Nikkei 225 index fell by 0.7% following recent gains spurred by President Donald Trump’s announcement of a trade deal that established a 15% tax on imports from Japan. Concurrently, the inflation rate in Tokyo increased by 2.9% year-on-year in July, slightly down from June’s 3.1%, leading to expectations that the Bank of Japan would maintain current interest rates during its upcoming meeting. In the Chinese markets, there was also a negative trend, with Hong Kong’s Hang Seng index dropping by 1.1% and the Shanghai Composite seeing a 0.3% decline. Notably, prior to these developments, China and the European Union made a joint appeal regarding climate change, which highlighted their ongoing disagreements on various issues, including trade and the war in Ukraine. President Trump suggested that he may visit China soon as tensions appeared to ease slightly. Analysts anticipate impending changes regarding tariffs, which could heavily influence market dynamics in the coming weeks. In South Korea, the Kospi index managed a modest increase of 0.3%, contrasting with a 0.4% decrease in Australia’s S&P/ASX 200 index. Meanwhile, Alphabet posted a 1% increase in its stock after reporting better-than-expected profits, revealing plans to invest an additional $10 billion into artificial intelligence initiatives this fiscal year, raising their total budget for AI investments to $85 billion. Tesla’s performance was mixed, meeting or surpassing analyst predictions but facing scrutiny over how CEO Elon Musk's political engagement may be impacting consumer interest, with warnings of potential rough quarters ahead due to loss of U.S. incentives. Overall, the ongoing uncertainties surrounding U.S. tariffs and their possible implications for inflation and economic stability continue to keep investors on edge as the market rallies look forward to possible trade agreements.