US stock index futures fell on Thursday as concerns over massive spending on artificial intelligence resurfaced after the first major tech earnings reports, while a fresh rise in oil prices, driven by escalating tensions in the Middle East, negatively impacted risk appetite.

The second-quarter results of Alphabet and Tesla, the first of the 'Magnificent Seven' companies to report this season, were not well received by investors, according to Reuters, renewing questions about the expected returns from massive investments in artificial intelligence.

Despite Alphabet, Google's parent company, posting its strongest quarterly growth ever in cloud computing, investors shifted focus to the company's high capital expenditure plans, sending its shares down 3.6% in premarket trading.

Tesla shares also fell 6% after the company reported negative free cash flow in the second quarter for the first time in over two years.

Lale Akoner, global market strategist at eToro, said: 'Alphabet and Tesla show two completely different stages of the AI investment cycle. Alphabet has already begun to show this correlation, while Tesla still needs to prove that its ambitious projects can transform from tech promises into commercial returns.'

Capital expenditure plans will remain a market focus as other major tech companies report results next week, with investors watching how much the massive AI investments can generate tangible returns and whether profit growth justifies the sector's high valuations.

Geopolitical developments added pressure on markets as investors' focus shifted from the Strait of Hormuz to the Red Sea, where Iran-backed Houthis, who control areas near the Bab el-Mandeb Strait, opened a new front in the Middle East crisis.

Brent crude futures rose to $98 a barrel, their highest level since early June, reigniting inflation concerns and pushing the two-year US Treasury yield, sensitive to interest rate expectations, to its highest in 17 months.

Markets also increased bets on the Federal Reserve raising interest rates sooner, with the CME FedWatch tool indicating a 35% probability of a 25-basis-point rate hike at the July meeting, up from 12% a week ago, while the probability for September stands at 55%.

The weekly jobless claims report, due at 8:30 a.m. ET, is expected to provide further indicators of the strength of the US labor market and economy.

At 6:51 a.m. ET, Dow Jones futures fell 142 points, or 0.27%, S&P 500 futures declined 20.25 points, or 0.27%, and Nasdaq 100 futures dropped 81.5 points, or 0.28%.

Chipmaker stocks had mixed performance after a recent bout of sharp volatility. Texas Instruments shares fell 4% despite its quarterly revenue forecast beating market estimates.

In contrast, Lockheed Martin shares rose 5.4% after the company raised its 2026 sales and profit forecasts, while ServiceNow shares jumped 7% after the enterprise software company raised its annual subscription revenue forecast for the second time.