Planned artificial intelligence spending of $600 billion by major tech firms in 2026 is raising investor concerns over profitability and potential existential risks to smaller software companies. Shares of Amazon, which announced a $200 billion capital expenditure plan, fell 7% on Friday. Alphabet lost 3% after revealing on Wednesday that its capital spending could double this year, while Meta Platforms dropped 1.3%. Other tech giants traded higher: Nvidia rose 7%, Microsoft gained 1%, and Tesla was up 4%. The S&P 500 added 1.6% and the Nasdaq rose 2%, though both indexes are set to close the week lower, reports Reuters.
“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. So it’s a de-risking trade.”
Nvidia CEO Jensen Huang attributed the surge in spending to “sky-high” demand. Speaking on CNBC’s Halftime Report, he described the increased investment as appropriate and sustainable.
The selloff has been particularly acute among software and data analytics companies, triggered by a new plug-in from Anthropic’s Claude. Shares in London Stock Exchange Group clawed back some ground on Friday but remained down almost 8% for the week, marking a second consecutive week of sharp losses. The week’s decline in AI-exposed stocks has also weighed on broader equity markets. Global shares are on track to ease 0.33% for the week.
Investor nerves have been particularly evident in India, where software exporters fell another 2% on Friday, completing a week that saw $22.5 billion in market value wiped out. Concerns over AI-driven disruption are coinciding with investor sensitivity to big tech firms signaling heavier spending. Alphabet, for example, increased its capital plans on Thursday, sending shares down as much as 8% intraday before closing 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 at Hargreaves Lansdown.
Equities of data analytics firms continued to face selling pressure over fears that powerful new AI models could pose an existential threat. Canada-based Thomson Reuters, which experienced a record one-day plunge earlier this week, fell 0.7%. London-listed RELX lost 4.6%, marking its worst week since 2020 with a 17% drop. The S&P 500 software and services index has fallen nearly 8% this week, wiping out roughly $1 trillion in market value 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.”
Bd-pratidin English/ Jisan
