ASX 200 Slips 0.31% to Close at 8,811.8 as Disappointing Alphabet and Tesla Earnings Rattle Markets

SYDNEY — Australia's benchmark stock index closed lower Friday, pulling back from a three-session winning streak as disappointing earnings reactions from Alphabet and Tesla rattled global markets and offset a boost from surging oil and gold prices at home.

The S&P/ASX 200 finished the session at 8,811.8, down 27.2 points, or 0.31%, from Thursday's close. The decline came despite a milder outcome than futures markets had initially signaled, with SPI futures earlier in the day pointing to a drop of roughly 65 points, or 0.75%, based on a sharply negative overnight session on Wall Street.

A rough night on Wall Street

Friday's pullback traces directly to a steep selloff in U.S. markets Thursday, where investor enthusiasm around artificial intelligence spending took a significant hit following quarterly results from two of the world's most closely watched technology companies. The Dow Jones Industrial Average dropped 506.93 points, or 0.97%, to close at 51,711.65, while the S&P 500 fell 1.21% to 7,408.30 and the Nasdaq Composite dropped 2.15% to 25,137.69, weighed down heavily by steep declines in both Alphabet and Tesla shares.

Alphabet shares fell roughly 7% despite the company posting stronger-than-expected second-quarter revenue of $119.8 billion, as investors focused instead on the company's decision to raise its full-year 2026 capital expenditure guidance to a range of $195 billion to $205 billion, up from its previous forecast of $180 billion to $190 billion. Tesla shares fell even further, tumbling roughly 14%, after the company posted non-GAAP earnings per share of $0.33 against expectations of around $0.55, with operating margin falling to just 1.4% even as second-quarter revenue climbed 26% to $28.24 billion on record vehicle deliveries.

Together, the two companies shed roughly $500 billion in combined market value in a single session, with Tesla losing about $200 billion and Alphabet losing roughly $300 billion. Amazon shares were also pulled down in sympathy, falling 4.6% and shedding about $120 billion in market value.

A more measured local reaction

Despite that steep overnight selloff in the U.S., the Australian market's own decline Friday was considerably more contained, helped by strength in local energy and gold-related stocks that offset weakness in technology shares. Oil prices surged overnight following reports that tankers had been struck off the coast of Saudi Arabia, with West Texas Intermediate crude jumping 5.8% to $91.87 a barrel and Brent crude climbing 6.65% to $100.33 a barrel, according to Bloomberg data. That spike gave a lift to Australian energy names including Santos and Woodside Energy Group heading into Friday's session.

Gold prices also extended a two-day rebound to around $4,130 an ounce Thursday, supporting Australian gold miners including Catalyst Metals, which gained nearly 1.7%, and Fortescue, which rose more than 1.4%.

Technology stocks bore the brunt locally

Australia's information technology sector was the weakest performer on the local market Thursday and into Friday's session, directly reflecting the disappointing overnight earnings reports from Alphabet and Tesla. That underperformance in tech stood in contrast to broader index-level resilience driven by financials, resources and energy shares, echoing a pattern seen throughout much of July, in which strength in Australia's banking and mining sectors has periodically offset weakness tied to global technology sentiment.

A strong domestic jobs report added support

Beyond the offshore earnings reaction, Australian markets also digested a stronger-than-expected local employment report released Thursday, which showed a surprise jump in jobs growth. That data initially pushed markets to reprice expectations for the Reserve Bank of Australia's future policy path, contributing to gains in the ASX 200 on Thursday even as technology shares lagged. Australia's jobless rate held steady at 4.4% for the month, broadly in line with market expectations.

Analyst perspective on the AI spending debate

Market commentators pointed to Alphabet's and Tesla's earnings reactions as reflective of a broader shift in how investors are evaluating heavy AI-related capital spending across the technology sector. Alison Porter, a portfolio manager at Janus Henderson, offered a more constructive read on Alphabet's underlying business performance despite the stock's decline, telling CNBC's "Squawk Box Europe" that the company's results reflected genuine strength. "This is one of the strongest revenue growth quarters that Alphabet has had in five years, and Alphabet is a really great barometer for this whole AI wave," Porter said, pointing to Google Cloud's 82% revenue jump to $24.8 billion and an improvement in that division's operating margin to 35.6%, up from 20.7% a year earlier, as evidence that some of the company's AI investments were beginning to show tangible returns.

A volatile week for the index

Friday's decline caps a choppy week for the ASX 200, which had climbed for three consecutive sessions into Thursday's close of 8,839 points before Friday's pullback. Over the trailing 52 weeks, the index has traded between 8,262.40 and 9,202.90, with the benchmark having touched a record high in late February before pulling back sharply in March amid broader market volatility.

With flash purchasing managers' index readings for July due out Friday and additional major corporate earnings reports still to come from companies including IBM in the U.S., investors are likely to remain focused on whether Thursday's steep AI-related selloff marks a genuine shift in sentiment around technology spending or a shorter-term reaction to two individually disappointing earnings reactions. For Australian markets specifically, the continued strength in oil and gold prices tied to escalating tensions in the Middle East is expected to remain a key offsetting factor for local energy and mining shares, even as technology-linked sentiment globally remains under pressure heading into the final full week of July earnings season.