Big Techs $600 billion spending plans exacerbate investors AI headache
By Lucy Raitano, Dhara Ranasinghe and Chibuike Oguh
NEW YORK/LONDON, Feb 6 (Reuters) – Major technology firms’ planned $600 billion in AI spending in 2026 is raising investors’ uneasiness as they weigh its impact on profitability and the potential existential threat to software firms.
Shares of Amazon, which announced $200 billion in capital expenditures, tumbled 7 percent on Friday, while Alphabet lost 3 percent after the company said Wednesday that capital spending could double this year. Meta Platforms fell 1.3%.
But other heavyweight tech companies were trading higher: Nvidia was up 7%, Microsoft was up 1%, and Tesla was up 4%. The benchmark S&P 500 rose 1.6%, while the Nasdaq rose 2%, but both indexes will finish the week lower.
“From the market’s perspective, we think the AI development business and the way it’s pulling all those gains forward over many years is very expensive,” said Andrew Wells, chief investment officer at SanJac Alpha in Houston. “That doesn’t mean the trade is over, but it’s become too expensive to pull forward all these potential future revenues and not really price the risk into all of that. So it’s a de-risked trade.”
Meanwhile, shares of data analytics firms remained under selling pressure on concerns that they face an existential threat from powerful new artificial intelligence models.
Canada-based Thomson Reuters, which had a record one-day drop earlier this week, lost 0.7%. London-listed RELX shares lost 4.6%, marking a 17% decline in their worst week since 2020.
The S&P 500 software and services index has fallen nearly 8% this week and has seen nearly $1 trillion in market value evaporate since January 28.
St. in London “The headlines that would push stocks to new highs during the peak of AI optimism are now being interpreted much more carefully by investors,” said Carlota Estragues Lopez, stock strategist at James’s Place.
“It’s not just the return on investment that worries investors, but also the risk of narrow market leadership struggling to expand beyond a handful of mega-cap names.”
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London Stock Exchange Group shares rebounded somewhat on Friday, but their prices were still down almost 8% for the second week of sharp losses in a row.
This week’s decline in AI-exposed stocks has weighed on broader equity markets. Global stocks are on track to end the week down 0.33%.
This defeat was particularly severe in India; Shares of software exporters here fell another 2 percent on Friday as they wrapped up a week that resulted in a loss of $22.5 billion in market value.
Investors’ nervousness about potential AI-driven disruption coincides with a growing trend to punish big tech firms for signaling more spending on technology.
Google’s parent company Alphabet also raised its spending plans on Thursday, and its shares fell as much as 8 percent at one point, but closed the day flat.
“Both Alphabet and Amazon delivered strong underlying business performance, driven by better-than-expected growth in cloud, but this was not enough to distract markets from their ballooning capital investment plans,” said Hargreaves Lansdown equity analyst Aarin Chiekrie.
(Reporting by Chibuike Oguh in New York, Lucy Raitano and Dhara Ranasinghe in London; Editing by Amanda Cooper, Alexander Smith and Nick Zieminski)
