Meta Faces a Mountain of Lawsuits Amid a Costly AI Pivot

SPEAKER_1 (0:00)

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Luke Vargas (0:33)

Oil prices rise on another flare-up in the Middle East. Plus, Meta battles a mountain of social media lawsuits just as it tries navigating a costly AI transformation. And we'll look at signs that Europe's luxury brands could be starting to move past years of sluggish demand.

Nick Kostoff (0:51)

The very rich seem to be spending a lot, what the industry calls aspirational kind of middle class consumers are still not spending as much as they were. So we're still a long way from the boom years.

Luke Vargas (1:02)

It's Wednesday, July 29th. I'm Luke Vargas for the Wall Street Journal. And here is the AM Edition of What's News, the top headlines and business stories moving your world today.

Iran has launched a surprise ballistic missile attack on American forces in Jordan, which could pile new pressure on President Trump to renew the war in earnest. Just as negotiations to reopen the Strait of Hormuz and broader peace talks had been picking up speed, the US military said that all of the missiles were intercepted and that American and Saudi fighter jets had carried out strikes in Iraq on groups that Iran's Revolutionary Guard had previously directed to attack US troops and Saudi energy infrastructure. In Markets News, shares in South Korea's SK Hynix have fallen almost 10% even after the world's second largest memory chipmaker reported a 13-fold jump in its net profit for the second quarter. Despite strong demand for advanced chips from the Nvidia supplier, those results fell short of high market expectations and have done little to ease concerns about spending on AI infrastructure. As we mentioned yesterday, Visa is planning to cut around 7% of its workforce as the company adjusts to a changing payments industry, but in its latest earnings report, it's signaled that its customers are doing all right as it posted higher revenue on strong consumer and business spending. Here was CFO Chris Suh.

Chris Suh (2:33)

And the strength I would also note is pretty broad-based. We're seeing improvements around credit and debit, discretionary spend, non-discretionary spend, card present, card not present, and across the spend bands as well. As I remarked in my commentary, we didn't see any signs of weakening across the lower parts of the spend band either.

Luke Vargas (2:53)

Those results came as the conference board yesterday said that US consumer confidence declined in July for the third straight month on softening assessments of current business and labor market conditions.

Well, splitting the difference between those outlooks are Europe's luxury brands. Shares of Gucci parent carrying are up more than 10% after it posted a rise in revenue this morning, while Hermes recorded a similar uptick in second quarter sales growth. Reporter Nick Kostoff covers luxury from our Paris bureau and says that while the sector is seeing strong spending from the ultra-wealthy, aspirational consumers are still holding back.

Nick Kostoff (3:33)

Companies like Richemont, which owns Cartier and Van Clef, like Hermes, obviously, which makes the Birkin bag and the Kelly, those companies which are catering to the wealthiest are doing just fine, and the companies that are more exposed to the middle classes, i.e. LVMH, caring with Gucci, they're still not doing great. I think one other thing to note in the results, this is something that the LVMH CFO flagged on the call, but that in the pockets where there is a lot of wealth being created because of the AI boom, i.e. the US., South Korea, these luxury companies are seeing very positive results.

Luke Vargas (4:10)

We've got a busy earnings day coming up with Procter & Gamble reporting results before the opening bell, while Microsoft, Meta, Qualcomm, and Starbucks are due after the close.

While also coming this afternoon, the Fed is set to wrap up its latest monetary policy meeting. Analysts are expecting that it holds rates steady, as they are when the Bank of England and Bank of Japan make their own rate decisions tomorrow and Friday. But with inflation risks spurred by this month's resumption of fighting between the US and Iran, triggering a surprise rate hike by Singapore's Central Bank on Monday, could more curveballs be in store? To take on that question, I'm joined by Paul Hannon, the economics editor for Dow Jones Newswires. Paul, I'm curious, when we look ahead to these rate moves this week, do you see Singapore's surprise as potentially for running a trend or more likely as a bit of an outlier?