Google and Tesla Mixed Earnings, Commodity Surge, and AI Spending Concerns

Key Takeaways

1. Google reported record Q2 revenue of $120B but negative free cash flow due to AI capex doubling.
2. Tesla deliveries grew 25% YoY but net profit fell 5% and operating margin dropped to 1.4%.
3. Commodity prices surged post-Iran conflict, with sulfur up 146% and European natural gas up 94%.
4. US initial jobless claims fell sharply to 187K, much lower than expected.
5. Marc Andreessen joined a16z speedrun as an investing partner, focusing on AI dev tools and infrastructure.
6. 30-year Treasury yield hit post-pandemic high, while TIPS real yield near 3% seen as potential buying opportunity.

1. Corporate Earnings: Google and Tesla

1. Google's Q2 2024 earnings revealed revenue of $120 billion (up 24% YoY), but net income included $98 billion in unrealized gains from equity investments. The company posted its first negative free cash flow of -$5.9 billion as AI capital spending doubled to $44.9 billion, with full-year capex guidance raised to $195-205 billion. — via 1 2 3
2. Tesla's Q2 2024 delivery hit 480,000 vehicles, up 25% YoY, the highest growth since Q3 2023. Revenue reached a record $28 billion, but net profit fell 5% to $1.1 billion, operating margin dropped from 4.1% to 1.4%, and free cash flow turned negative (-$1.1 billion) due to a 142% increase in capex. — via 1 2

2. Macroeconomic Data and Commodity Surge

1. US initial jobless claims plunged to 187K for the week, well below the 210K consensus, with the largest declines in New York, Michigan, and California. Continued claims also came in lower than expected. — via 1
2. Commodity prices surged since the Iran conflict, with sulfur up 146%, European natural gas up 94%, heating oil +64%, jet fuel +46%, diesel +39%, gasoline +37%, rice +37%, WTI crude +35%, Brent crude +35%, cotton +25%, DAP +24%, wheat +20%, and palm oil +16%. — via 1
3. 30-year Treasury yield rose to post-pandemic highs, while 30-year TIPS real yield approached 3%, viewed as a potential generational buying opportunity by some investors. — via 1 2
4. The Kansas City Fed manufacturing index fell to 9 in July (below 12 consensus), with new orders, prices paid, and employment components weakening. The prices paid index dropped sharply from 68 to 52. — via 1
5. Mortgage applications rose 1.9% week-over-week after a prior decline of 2.7%, but the 30-year mortgage rate climbed to 6.7%, the highest since August 2023. — via 1

3. AI Industry Dynamics and Investment Signals

1. Marc Andreessen announced joining a16z's speedrun team as an investing partner, offering up to $1M to early-stage founders, with a focus on AI dev tools, agent reinforcement learning and evaluation, data, and infrastructure. — via 1
2. Debate on AI open vs. closed source intensified. Lyn Alden argued that only OpenAI and Anthropic shareholders see closed source as dystopian; others find dystopian the prospect of only using closed-source models controlled by U.S. security agencies. Jason criticized AI labs for lobbying and stock trading to buy government protection and lock down open-source models, calling it regulatory capture. — via 1 2 3
3. Raoul Pal argued that the biggest future marketplace will be data needed by AI, and that an agentic economy at machine speed is emerging. He also noted that if one's returns are below 11% annually, they are not actually making money relative to monetary debasement. — via 1 2
4. Short selling psychology was discussed by MuddyWaters Research, noting that depression is common among short sellers. Carson Block shared that he has adjusted his strategy to include momentum trading and long mining stocks to reduce emotional toll. — via 1 2