European Stocks Drop on AI Spending Fears and Oil Spikes

European shares declined on Thursday, July 23, 2026, led by a 0.5% drop in the STOXX 600 and a 1.16% fall in the French CAC 40. The downturn was driven by investor anxiety over artificial intelligence infrastructure costs after Alphabet Inc. increased its planned 2026 capital expenditure by $15 billion. Both Alphabet and Tesla reported negative free cash flow in their quarterly earnings, while IBM missed Wall Street expectations for second-quarter earnings and revenue, prompting the company to lower its full-year growth forecast.

These valuation concerns heavily impacted the semiconductor sector. STMicroelectronics shares plummeted approximately 15% following a lower-than-expected revenue forecast, and BE Semiconductor Industries declined 4.6%. Other losses in France included Eurofins Scientific, Kering, and LVMH.

Conversely, energy stocks rose as Brent crude climbed toward $98.75 per barrel. This price spike followed U.S. military strikes on Iran and Houthi attacks on tankers in the Red Sea. TotalEnergies saw a 2.8% stock increase based on robust second-quarter results. Meanwhile, the European Automobile Manufacturers Association reported that June new car sales in the Eurozone grew 13.6% year-on-year, driven by electric vehicle demand. Investors remain focused on the European Central Bank, which is widely expected to keep interest rates unchanged.