Big Tech’s race to dominate artificial intelligence is turning into a headache for investors.
Technology giants are expected to spend more than $600 billion this year on AI infrastructure, but the huge outlays are raising concerns about whether the returns will justify the cost.
Amazon shares fell 7 per cent on Friday after the company announced a $200 billion capital expenditure plan. Alphabet dropped 3 per cent after saying its spending could double this year, while Meta slipped 1.3 per cent.
Not all tech stocks declined. Nvidia rose 7 per cent, Microsoft gained 1 per cent, and Tesla climbed 4 per cent. The S&P 500 added 1.6 per cent, while the Nasdaq rose 2 per cent, though both indexes remain on track for weekly losses.
Analysts say the market is beginning to question whether the AI boom has become too expensive.
“The AI build-out trade has simply got too pricey,” said Andrew Wells, chief investment officer at SanJac Alpha. “Investors are now reducing risk because future earnings may not come as quickly as expected.”
Nvidia chief executive Jensen Huang defended the spending surge, describing demand for AI chips as “sky-high” and saying the investments are sustainable.
However, pressure is mounting on software and data analytics companies, with fears that powerful AI tools could disrupt their businesses.
Thomson Reuters shares slipped again after a sharp drop earlier in the week, while RELX recorded its worst weekly fall since 2020. The S&P 500 software and services index has fallen nearly 8 per cent, wiping out about $1 trillion in market value since late January.
Experts say investor sentiment has shifted.
“News that once pushed stocks higher is now being treated cautiously,” said Carlota Estragues Lopez, an equity strategist at St. James’s Place. “Concerns go beyond returns to the risk that only a few mega-cap companies benefit.”
The sell-off has also hit global markets. In India, software exporters lost about $22.5 billion in market value this week alone.
Although Amazon and Alphabet reported strong growth in their cloud businesses, analysts say their heavy AI spending continues to unsettle investors.
For now, Big Tech is doubling down on AI. But markets are demanding clearer proof that the billions being spent will deliver real profits.
