Big Tech stocks take a $1 trillion tumble as projected AI spending continues to outweigh revenue — investors are antsy about long-term planning becoming never-ending spending
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Big spending in AI-related investments has become the new normal to the point that it's now background noise. Even still, occasionally there's a sonic boom. Just yesterday, Amazon announced that it would be spending $200 billion in 2026, or $50 billion more than predicted. Investors didn't like that, and the company's shares took a steep 9% nosedive, taking some of its friends along for the ride for a combined sell-off approaching $1 trillion.
According to the Financial Times, the Big Tech players are set to spend a $660 billion on AI investments, an amount larger than the GDP of Israel. Investors who were once very bullish on the AI race, not wanting to be left out, are reportedly starting to get cold feet.
Revenue large enough to outstrip AI investments could be looking more like a mirage than an oasis, with analyst Dec Mullarkey stating that the announced spend is "not welcome news for investors that are already fixated on when AI-related revenue will start to show up."
Amazon took the brunt of the hit, as, along with the gigantic increase in capital expenditures, investors are seemingly frowning at the possibility of the outfit cannibalizing its lead in cloud services and even retail presence for the sake of AI. Stressing that particular point, analyst firm D.A. Davidson downgraded Amazon's rating from "buy" to "neutral".
The big loser group includes Meta and Alphabet (Google), which saw their shares take around a -2% and a -3% spill respectively, for the same base reasons. Even Google's record earnings and a contract with Apple for providing Cupertino's AI services didn't help it escape investor wrath. Analyst Mamta Valechha points out that alongside key fears, investors are not appreciating the companies' lack of visibility into exactly how these investments are expected to play out.
One week doesn't make for deep financial analysis, but it's worth noting that since Monday, today's sell-off puts Amazon at around -11.3%, Alphabet at -3.15%, Meta at -7.4%, Microsoft at -7.7%, and Oracle at -9.2%.
Meanwhile, Tim Cook is probably chuckling and eating popcorn. Only a scant few months ago, Apple was strongly criticized for dropping out of the AI race and for the lack of its much-touted Apple Intelligence in its latest software releases.
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The firm ultimately threw in the towel and hired Google's Gemini for that duty, but not having spent untold billions resulted in investors sending the stock price up 7.5% over the week, helped by "staggering" demand for the latest iPhones.
Bruno Ferreira is a contributing writer for Tom's Hardware. He has decades of experience with PC hardware and assorted sundries, alongside a career as a developer. He's obsessed with detail and has a tendency to ramble on the topics he loves. When not doing that, he's usually playing games, or at live music shows and festivals.
