US stock index futures fell on Thursday as concerns about the massive spending on artificial intelligence resurfaced following 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' to report this season, did not win investor approval, reigniting questions about the expected returns from massive investments in artificial intelligence, according to Reuters.

Although Alphabet, Google's parent company, posted 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 are showing two completely different stages of the AI investment cycle. Alphabet has already started to show this correlation, while Tesla still needs to prove that its ambitious projects can transition from tech promises to commercial returns.'

Capital expenditure plans will remain a focus for markets as other major tech companies report their results next week, with investors watching to see whether the huge investments in AI can generate tangible returns and whether profit growth justifies the sector's high valuations.

Geopolitical developments added to market pressures, as investor 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 per barrel, its highest since early June, reviving inflation concerns and pushing the two-year US Treasury yield, sensitive to interest rate expectations, to a 17-month high.

Markets also increased bets on the possibility of the Federal Reserve raising interest rates earlier, 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 clues on the strength of the labor market and the US 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 forecast, while ServiceNow shares jumped 7% after the enterprise software firm raised its annual subscription revenue forecast for the second time.