A $600 billion artificial intelligence spending wave by Big Tech is unsettling investors, triggering market volatility and raising concerns over profitability, market concentration, and the survival of smaller software firms.
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| Investor enthusiasm for artificial intelligence is giving way to caution as massive capital spending plans expose risks to earnings, valuations, and global software companies. Image: CH |
Tech Desk — February 7, 2026:
A looming $600 billion surge in artificial intelligence investment by the world’s largest technology companies is prompting investors to rethink one of the market’s most powerful narratives, as concerns grow over profitability, valuation excesses, and the disruptive impact on smaller software firms.
The unease surfaced sharply in equity markets this week. Amazon shares slid 7% after the company outlined plans to spend $200 billion on capital investments tied largely to AI. Alphabet fell 3% after revealing that its capital spending could double this year, while Meta Platforms dropped 1.3%. The declines contrasted with gains among firms more directly linked to AI infrastructure, with Nvidia jumping 7%, Microsoft rising 1%, and Tesla advancing 4%.
Broader markets managed a short-term rebound, with the S&P 500 gaining 1.6% and the Nasdaq climbing 2% on Friday. Even so, both indexes remain on track to finish the week lower, highlighting how AI-related volatility is increasingly shaping overall market direction.
At the heart of the shift is a growing belief that optimism around AI has run ahead of realistic expectations. “The market’s viewpoint is that the AI build-out trade has just got too pricey,” said Andrew Wells, chief investment officer at SanJac Alpha. He noted that years of anticipated earnings have effectively been pulled forward in valuations without sufficient allowance for execution and competitive risks, turning the current pullback into what he described as a “de-risking trade.”
Technology executives argue that the spending is justified. Nvidia CEO Jensen Huang has attributed the surge in investment to “sky-high” demand for AI computing power, calling the pace of capital deployment both appropriate and sustainable. Yet investors appear increasingly skeptical that demand alone will guarantee attractive returns, especially as costs rise and the field becomes more crowded.
The selloff has been most severe among software and data analytics companies, where fears of disruption have intensified following the release of a new plug-in from Anthropic’s Claude. London Stock Exchange Group remains nearly 8% lower for the week despite a modest recovery, marking a second consecutive week of heavy losses. Weakness in AI-exposed stocks has spilled into global markets, with world equities on track to edge down 0.33% for the week.
Investor anxiety has been particularly visible in India, where software exporters fell another 2% on Friday, completing a week that erased $22.5 billion in market value. The declines reflect growing concern that AI could undermine long-established outsourcing and services models, just as global investors become more sensitive to signals of heavier spending by U.S. tech giants.
Even solid underlying business performance has struggled to calm markets. Alphabet and Amazon both posted better-than-expected cloud growth, but analysts say those gains were overshadowed by ballooning capital expenditure plans. “That hasn’t been enough to distract markets from their investment commitments,” said Aarin Chiekrie, an equity analyst at Hargreaves Lansdown.
Pressure has also continued to mount on data analytics firms perceived as especially vulnerable to AI advances. Thomson Reuters slipped again after suffering a record one-day plunge earlier in the week, while RELX posted its worst weekly performance since 2020, down 17%. The S&P 500 software and services index has fallen nearly 8% this week, wiping out roughly $1 trillion in market value since late January.
As the AI narrative matures, investors are no longer reacting reflexively to ambitious announcements. Headlines that once propelled stocks to record highs are now being scrutinized for what they imply about returns, market concentration, and long-term sustainability. The AI trade is not disappearing, but it is entering a more demanding phase—one in which scale, discipline, and profitability may matter as much as innovation itself.