※[Global Morning Briefing] summarizes global news delivered by Seoul Economic Daily.
"Strong AI Demand"...Google to Pour 300 Trillion Won This Year
Google, one of the three major hyperscalers (operators of large-scale computing infrastructure) leading the global artificial intelligence (AI) market, has again raised its planned AI investment for this year. With AI demand proving robust in its quarterly earnings, the company decided to increase capital expenditure to among the highest levels in the industry. The investment increase is expected to work as a boon for memory manufacturers including SK hynix, Samsung Electronics and Micron.
Alphabet, Google's parent company, said on the 22nd that its revenue in the second quarter (April-June) this year rose 24% from a year earlier to $119.8 billion (about 175.735 trillion won). The gain was largely driven by cloud (large-scale virtual space connected via the internet) revenue, which surged 82% in a year, exceeding expectations.
Cloud order backlog rose sharply to $514 billion from $460 billion in the previous quarter.
Having confirmed AI demand, Alphabet raised its capital expenditure for this year once again. Capital expenditure, initially presented at $175 billion to $185 billion at the start of the year, was increased to $180 billion to $190 billion at the first-quarter earnings announcement, and this time jumped to $195 billion to $205 billion (about 285.98 trillion to 300.61 trillion won). The figure exceeds Amazon, which at $200 billion has the highest investment among major hyperscalers.
"Cloud Proves Growth"...First Cash Shortage in 20 Years a Burden
Google raised its AI spending to the top level in the industry because still-strong AI demand was confirmed. Unlike market concerns that its investment is excessive, Google emphasized that with long-term orders increasing, it is instead time to further expand infrastructure to fulfill contracts. As the other Big Tech firms also escalate the spending competition, voices of concern are emerging in the market.
Chief Financial Officer Anat Ashkenazi said in a conference call after the earnings announcement, "We are raising our annual capital expenditure scale from $180 billion to $190 billion to $195 billion to $205 billion."
Chief Executive Officer Sundar Pichai stressed, "We have confirmed strong demand indicators, including long-term contracts," adding, "The current situation is much more positive than a year ago, and this is exactly what gives us the confidence to make these investments."
The market sees a high possibility that the ECB will pursue further tightening. According to the Financial Times (FT), the market is pricing in the possibility of two additional 25bp rate hikes by the first quarter of next year. Accordingly, there is speculation that the ECB could pursue an additional rate hike in September or October.
However, concerns over Google's investment moves are also growing. In the second quarter, Google exhausted all its cash for the first time in some 20 years since its August 2004 listing, posting negative free cash flow of $5.9 billion. Last month, Google decided to issue $85 billion worth of stock to raise cash, the first such move in some 20 years. Critics point out that if Amazon, Microsoft and Meta, whose earnings announcements are scheduled, also join the spending competition, their financial structures could worsen and investor concerns about the justification for the investments could amplify.
"Blocking Chinese AI Kills Only Us"...U.S. Startups Appeal to Trump
About 200 Silicon Valley companies sent a letter to the Donald Trump administration arguing that access to Chinese open-weight models (a method that publicly releases the weights an AI model has learned so that anyone can use them) within the U.S. should be maintained. Opinion within U.S. industry is also split between American large language model (LLM) companies such as Anthropic and startups that need cheap Chinese-made models.
According to Politico on the 22nd, the "Little Tech Association," which comprises more than 200 startups and venture capital (VC) firms, delivered this position to President Trump, Commerce Secretary Howard Lutnick and other administration officials that day. It marks the first case in which the Silicon Valley startup industry has jointly responded, after reports that the White House is reviewing regulation of open-weight AI models released by Chinese companies, including Moonshot AI's model "Kimi K3."
Nvidia CEO Jensen Huang also pointed out in an interview with Axios, "There is no possibility that Chinese AI will push U.S. companies such as OpenAI and Anthropic out of the market," adding, "The market is misinterpreting Kimi's impact." Huang stressed, "The spread of cheap open-source models will increase AI users, which will increase demand for the chips, data centers and computing resources Nvidia sells."
U.S. "Forced Labor Tariffs" as Early as Tomorrow...Will Korea Defend 15%?
U.S. Trade Representative (USTR) Jamieson Greer signaled that tariffs on imports produced with forced labor will be imposed on Korea and other countries as early as the 23rd, based on Section 301 of the Trade Act. Korea's position is that the 15% tariff ceiling rate the two countries reached in a trade agreement must be upheld.
Greer said through written material at a U.S. Senate Finance Committee hearing on the 22nd, "As early as tomorrow (the 23rd), the USTR will issue final measures against 60 trade partner countries for their failure to address products produced with forced labor."
The Trump administration, immediately after the U.S. Supreme Court ruled its reciprocal tariffs illegal on February 20 this year, imposed a 10% global tariff based on Section 122 of the Trade Act for a 150-day term. When this tariff term ends as of the 24th, new tariffs under Section 301 of the Trade Act will be levied on each country.
ECB Holds Rates...Watching Energy-Driven Inflation Impact
The European Central Bank (ECB) held all three of its policy rates steady. Although inflation concerns are rising again recently due to geopolitical risk from the Middle East, the move is interpreted as intent to respond while checking economic indicators for a while, seeing a need to further confirm the impact of the energy price shock on prices.
The ECB said it held a monetary policy meeting in Frankfurt, Germany, on the 23rd and decided to keep the deposit rate (2.25%), the main refinancing rate (base rate, 2.40%) and the marginal lending rate (2.65%) all at current levels. The ECB currently uses the deposit rate as the core benchmark of monetary policy among the three policy rates.
