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Trade Deal Progress and AI Spending Concerns
The U.S. and EU have reached a framework deal that sets a 15% tariff on most EU exports to the U.S., significantly lowering the risk of a trade war as it was previously threatened at 30%. Additionally, the EU committed to purchasing $750 billion in U.S. energy and $600 billion in investments, including military equipment. Meanwhile, U.S.–China tariff talks aim to extend the current truce beyond the August 12 deadline.
Companies including Amazon, Microsoft, Alphabet, and Meta are investing approximately $1.5 trillion on AI over five years, with a projected half-trillion dollar spending this year on R&D and infrastructure. However, concerns have been raised about whether the return on this monumental investment will justify the costs, which could lead to profit declines if expectations aren’t met.
Last week, Microsoft announced job cuts affecting over 15,000 employees. These layoffs can potentially save around $2.25 billion in annual payroll costs but may not offset the company’s approximately $80 billion AI expenditure this year. The situation highlights a growing tension between corporate profitability and rising operational expenses linked to AI initiatives.
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