Good morning. Today we're talking about Big Tech’s AI spending spree, car finance mis-selling compensation and the latest US tariffs.

Big Stories

Big Tech's AI spending spree

Meta is planning to dramatically increase spending on AI this year to an estimated $66-72bn, more than double initial plans. The Facebook parent, like peers such as Microsoft, is leveraging its highly profitable legacy business to finance a massive investment in AI talent and infrastructure. This enormous spending is being funneled into AI infrastructure, from custom chips to "superintelligence labs," in a race where even billion-dollar investments are now standard. AI-driven tools are already boosting Meta’s advertising revenue, which jumped 22% last quarter to $47.5bn, thanks to smarter ad targeting and a 40% increase in "click-to-message" revenue - a type of ad that allows users to directly initiate a conversation with a business through a messaging app like WhatsApp when they click on the ad. This trend is mirrored across Big Tech. Microsoft's stock recently soared after its own strong earnings report, making it the second company ever, after Nvidia, to reach a $4tr market cap. The company is also heavily investing in its AI infrastructure, planning to spend $30bn in the next quarter alone. This dynamic shows that Wall Street is actively rewarding companies for betting big on AI, with the past success of their core businesses bankrolling a future built on artificial intelligence.

Car finance payouts at risk

The UK's financial regulator, the FCA, has assessed that a compensation scheme for the mis-selling of car loans could cost the industry as much as £18bn. However, a recent Supreme Court ruling has significantly altered this landscape, delivering a major blow to millions of potential claims. The FCA's investigation centered on discretionary commission arrangements, where lenders allowed car dealers to increase interest rates on car finance deals to earn a higher commission. This practice, which took place on agreements made before 2021, was the basis for the multi-billion-pound estimate. The potential payout for individuals was expected to be substantial, with estimates suggesting the average payout could be around £1,600 per customer, though some more complex cases could be significantly higher. In a landmark decision on Friday, the Supreme Court ruled that these hidden commissions were not unlawful. This finding directly contradicts the legal basis on which many consumer claims were being pursued. As a result, millions of motorists who had expected to be eligible for compensation will now be unable to claim on this specific ground. The ruling provides a legal lifeline for lenders and dramatically reduces their potential financial exposure, despite the FCA's earlier warnings, shifting the focus away from widespread payouts.

Tariff tirade

Donald Trump has introduced a new global tariff regime, mandating a 10% minimum tariff on all imports and imposing significantly higher rates on dozens of nations. The policy, which represents a major shift toward protectionism, has already sent shockwaves through international markets. Among the hardest-hit countries is Switzerland, which faces a substantial 39% tariff, a steep increase from an earlier proposal. This levy, one of the highest announced, poses a significant threat to its export-driven economy, which relies on sending goods like pharmaceuticals and watches to the US. Canada also faces a sharp increase to 35%, though the policy importantly exempts goods that comply with an existing North American trade agreement. Economists warn that the sweeping tariffs could slow US economic growth and fuel inflation, while major stock markets have reacted negatively to the trade uncertainty.

Elsewhere...

New era: President Donald Trump has removed the head of the agency that produces the monthly jobs figures after a report showed hiring slowed in July and was much weaker in May and June than previously reported.

Splitting up: Unilever sales grew over the first half of the year on the back of strong gains from its ice cream business, which it is set to spin off later this year.

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