Big Tech's $600 billion spending plans exacerbate investors' AI headache
NEW YORK/LONDON, Feb 6 : A planned $600 billion artificial intelligence spending splurge by big tech firms in 2026 is adding to investor unease as they assess the implications for profitability as well as a potential existential threat to software firms.
Shares of Amazon, which had announced a $200 billion capital expenditure outlay, slid 7 per cent on Friday, while Alphabet lost 3 per cent after the company said on Wednesday that capital spending could double this year. Meta Platforms was down 1.3 per cent.
Other heavyweight technology companies, however, were trading higher: Nvidia rose 7 per cent, Microsoft gained 1 per cent and Tesla was up 4 per cent. The benchmark S&P 500 added 1.6 per cent while the Nasdaq rose 2 per cent although both indexes are set to finish the week lower.
"The market's viewpoint is that the AI build-out trade, and the way they've pulled forward all these earnings for many, many years, we think that's just got too pricey," said Andrew Wells, chief investment officer at SanJac Alpha in Houston. "It's not that the trade is over, but it got too pricey in pulling forward all these potential future revenues and not really pricing in the risk into all that. So it's a de-risking trade."
Nvidia CEO Jensen Huang attributed the uptick in spending to "sky-high" demand. Speaking on CNBC's "Halftime Report", he called the rise appropriate and sustainable.
Meanwhile, the equities of data analytics firms continued to come under selling pressure on concerns that they face an existential threat from powerful new AI models.
Canada-based Thomson Reuters, which suffered a record one-day plunge earlier this week, was down 0.7 per cent. London-listed RELX's shares lost 4.6 per cent and notched a 17 per cent tumble in their worst week since 2020.
The S&P 500 software and services index has fallen almost 8 per cent this week and has seen around $1 trillion in market value evaporate since January 28.
"Headlines that would have pushed shares to fresh highs during the peak of AI optimism are now being interpreted far more cautiously by investors," said Carlota Estragues Lopez, equity strategist at St. James's Place in London.
"It's not just return-on-investment that worries investors, but also the risk of narrow market leadership that struggles to broaden beyond a handful of mega-cap names."
JOLT TO DATA ANALYTICS FIRMS
A selloff in software and data and analytics firms was triggered by a new plug-in from Anthropic's Claude.
Shares in London Stock Exchange Group clawed back some ground on Friday, but their price was still down almost 8 per cent for the week in a second straight week of sharp losses.
This week's drawdown in AI-exposed shares has weighed on broader equity markets. Global shares are on track to ease 0.33 per cent for the week.
The rout has been particularly acute in India, where shares of software exporters plunged another 2 per cent on Friday as they ended a week that has seen $22.5 billion in market value losses.
Investor nerves over potential AI‑driven disruption are coinciding with a growing tendency to punish big tech firms for signaling even heavier spending on the technology.
Google parent Alphabet also upped its spending plans on Thursday, sending its shares as much as 8 per cent lower at one point, although they ended the day flat.
"Both Alphabet and Amazon delivered strong underlying business performance, driven by better-than-expected growth in cloud. But that hasn't been enough to distract markets from their ballooning capital investment plans," said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
