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Alphabet, SK Hynix ( HXSCF ), Infosys offer upbeat guidance

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Rosy forecasts come against backdrop of tariff uncertainty

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Governments scramble for tariff deals ahead of August 1

deadline

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Hyundai Motor ( HYMTF ) expects tariffs to take bigger toll in Q3

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Markets bolstered by strong tech results

July 24 (Reuters) - Businesses focused on artificial

intelligence are raking it in so far this earnings season. Those

catering to actual people, less so.

The AI spending surge is providing a big boost for

semiconductor and software giants like Google parent Alphabet

, while companies from airlines to restaurants and food

manufacturers are struggling to navigate an erratic U.S. trade

policy which is boosting costs, upending supply chains and

hurting consumer confidence.

Along with Alphabet, SK Hynix ( HXSCF ) and India's Infosys

exceeded market forecasts on Thursday and predicted

brighter days to come, with Alphabet and SK Hynix ( HXSCF ) both flagging

plans to boost spending. SK supplies the world's most valuable

company Nvidia ( NVDA ), the AI chipmaking giant that recently

surpassed $4 trillion in market value.

By contrast, executives at many consumer names were less

enthusiastic, from luxury bellwether LVMH, packaged

food giant Nestle, to toymakers Hasbro ( HAS ) and

Mattel ( MAT ) and airlines Southwest ( LUV ) and American

.

They, along with automakers and giants like Coca-Cola,

have indicated that some segments of the buying public have

pulled in their spending as prices and interest rates remain

high.

The dichotomy is evident in IBM's results. Sales in Big Blue's

"AI book of business" grew 25 percent in its most recent quarter

to $7.5 billion, while its software segment fell short of

expectations and the company sounded cautious about how much its

consulting segment might grow this year.

The equity market has accentuated the positive. News that the

U.S. had struck a trade deal with Japan and was closing in on a

deal with the European Union ahead of an Aug 1. deadline boosted

markets. The broad S&P 500 notched another record this

week and the Eurostoxx was just a few points shy of

that mark.

"The market is getting friendly with a view that tariffs

ending up higher than they have ever been for 100 years will not

have a negative impact on economic growth, because we haven't

seen any negative impact on economic growth so far," said Van

Luu, head of solutions strategy, fixed income and foreign

exchange at Russell Investments.

Whether companies continue to absorb that hit remains to be

seen. So far, companies have reported over July 16-22 a combined

full-year loss of as much as $7.8 billion, with automotive,

aerospace and pharmaceutical sectors hurt the most by tariffs,

according to a Reuters tariff tracker.

U.S. averages have been buoyed by the so-called Magnificent

Seven, a group of tech giants that has benefited heavily from

spending plans on artificial intelligence, and currently

accounts for more than 30% of the value of the S&P.

"AI is one of the strongest areas of growth for the economy, and

the market mirrors the economy," said Adam Sarhan, chief

executive of 50 Park Investments.

To be sure, the market's reaction may be in part because a

larger-than-normal percentage of companies are clearing a

lowered bar for estimates. At the beginning of April, the market

expected 10.2% year-over-year S&P earnings growth, but by July,

that number had dropped to 5.8%, according to LSEG data. With

about 30% of constituents reporting results, the blended

earnings growth rate sits at 7.7%.

TECH GOES FULL SPEED AHEAD

AI-focused businesses continued to print money in the most

recent quarter. Nvidia ( NVDA ) supplier SK Hynix ( HXSCF ) posted record

quarterly profit, boosted by demand for artificial intelligence

chips and customers stockpiling ahead of potential U.S. tariffs.

Indian IT services provider Infosys raised the floor

of its annual revenue forecast range to 1% to 3%, from flat to

3%, matching analyst expectations.

"The tech community is going ahead full speed ahead... and banks

are in a very strong position now," said Bill George, former

chairman and CEO of Medtronic and executive education fellow at

Harvard Business School. "Other companies will struggle to get

growth."

UNCERTAIN CONSUMER

Consumer companies have been less upbeat. Nestle, the world's

biggest packaged food maker, reported softer demand as it

struggled to win thrifty shoppers to its big brands.

U.S. airlines Southwest ( LUV ) and American Airlines ( AAL ) warned that

Americans are travelling less, the latest signal that U.S.

consumers are remaining cautious about their spending. Toymakers

Mattel and Hasbro ( HAS ) both said uncertainties around tariffs are

acting as a headwind.

Carmakers are among firms dealing with the most difficulty. The

auto giants are resisting raising prices, eating the cost of

tariffs that may cost them millions or billions of dollars.

Levies on metals, copper and auto parts made it harder to

navigate changing tariff policies.

South Korea's Hyundai Motor ( HYMTF ) on Thursday posted a 16%

decline in second-quarter operating profit, saying U.S. tariffs

cost it 828 billion won ($606.5 million) in the second quarter,

with a bigger hit expected in the current quarter. General

Motors ( GM ) still expects a $4 billion to $5 billion hit to

its bottom line this year.

On Wednesday, Tesla Chief Executive Elon Musk said U.S.

government cuts in support for electric vehicle makers could

lead to a "few rough quarters", as his firm reported its worst

quarterly sales decline in over a decade.

($1 = 1,365 won)