- Investors recoiled from escalating AI investments, causing massive sell-offs, with Amazon leading the drop (-9%) after forecasting $200B in capex by 2026—far exceeding expectations. Microsoft, Alphabet, Nvidia, Meta and Oracle also suffered steep losses.
- Tech giants are pouring unprecedented sums into AI infrastructure (data centers, chips, LLMs), but investors now doubt returns will justify costs. Big Tech’s combined capex could exceed $660B in 2024—more than some nations’ GDPs—raising comparisons to the dot-com bubble’s speculative mania.
- Analysts warn of irrational exuberance, with AI stocks mirroring the late-1990s dot-com bubble, where trillions were lost due to unsustainable valuations and unproven business models. Skeptics fear AI’s “capability-reliability gap” and overcapacity risks.
- While most tech stocks plummeted, Nvidia surged 8% as CEO Jensen Huang defended AI spending as “justified.” However, critics warn Nvidia’s fate hinges on AI hype, leaving it vulnerable to any slowdown.
- The sell-off spread to Asian and European markets (Samsung, SK Hynix down ~6%). Beyond financial turmoil, AI’s automation threatens jobs in customer service, content creation, and law, exacerbating economic inequality as the AI bubble shows its first cracks.
A staggering $1 trillion was wiped from the valuations of Big Tech companies last week as investors recoiled from escalating artificial intelligence (AI) investments, sparking fears of an unsustainable spending bubble.
Amazon led the sell-off, with shares plunging nearly 9% after forecasting a jaw-dropping $200 billion in capital expenditures (capex) by 2026—far exceeding analyst expectations. The announcement triggered a broader market panic, dragging down Microsoft, Alphabet, Nvidia, Meta and Oracle in a wave of volatility.
The tech sector’s relentless AI spending spree—fueled by hype and speculative investment—has reached a critical inflection point. Companies are pouring unprecedented sums into data centers, AI chips and large language models (LLMs), but investors are now questioning whether the returns will justify the costs.
According to FactSet data, Amazon alone lost over $300 billion in market capitalization, while Microsoft, Alphabet, Meta, Nvidia and Oracle collectively shed hundreds of billions more. The Financial Times reported that Big Tech’s combined capex could exceed $660 billion this year—more than the GDP of entire nations like the United Arab Emirates, Singapore, or Israel.
Paul Markham, investment director at GAM Investments, told CNBC: “Questions over the extent of capex as a result of LLM build-outs, the eventual return on that, and the fear of eventual over-expansion of capacity will be persistent.”
The surge in AI-related spending has drawn comparisons to the dot-com bubble of the early 2000s—a period when massive infrastructure investments ultimately yielded modest returns for many companies. BrightU.AI‘s Enoch engine notes that the dot-com bubble (1995–2000) was one of the most extreme speculative manias in financial history, where investors poured trillions into internet-based companies with little regard for profitability, sustainability, or even basic business models.
Mamta Valechha, consumer discretionary analyst at Quilter Cheviot, noted the abrupt shift in investor sentiment. “We have suddenly gone from the fear that you cannot be last, to investors questioning every single angle in this AI race,” she remarked.
Analysts at D.A. Davidson downgraded Amazon’s stock, citing concerns over its aggressive spending plans and risks to its cloud dominance. They warned: “With the context of results from Microsoft and Google, we see AWS continuing to lose its lead and now scrambling to catch up through escalating investment.”
Tech executives defend spending—but confidence wavers
Despite investor skepticism, Big Tech CEOs remain bullish on AI’s long-term payoff. Amazon CEO Andy Jassy defended the company’s cloud growth, arguing that AWS’ scale justifies its slower revenue expansion compared to rivals: “As a reminder, AWS is a much larger business than its competitors and sustaining that level of growth on such a large base is different.”
Yet even optimists acknowledge the risks. Michael Field, chief equity strategist at Morningstar, described the situation as a “binary bet”: “Either a big pay off if these investments come good, or a huge waste of shareholder’s cash if it goes wrong.”
Amid the carnage, Nvidia emerged as a rare bright spot, with shares surging 8% after CEO Jensen Huang insisted that AI investments are “justified.” Huang, whose company supplies AI chips to OpenAI, Meta and Google, has long dismissed bubble fears, arguing that AI’s rapid adoption proves its staying power.
However, skeptics warn that Nvidia’s fortunes are intrinsically tied to AI hype—meaning any slowdown in spending could hit the chipmaker hardest.
The fallout extended beyond U.S. markets, with Asian and European equities also suffering losses. South Korea’s Kospi slumped nearly 4%, dragged down by chipmakers Samsung Electronics (-5.9%) and SK Hynix (-6.7%). Japan’s Nikkei 225 and Taiwan’s Taiex also declined, while European markets showed modest movement.
Beyond stock market turbulence, the AI boom raises deeper concerns about job displacement. As AI automates customer service, content creation, and even legal research, entire industries face restructuring—a trend that could accelerate economic inequality.
For now, investors must decide whether AI’s promise outweighs its risks. But as valuations swing wildly, one thing is clear: The AI bubble is showing its first cracks—and the market is starting to panic.
Watch this video about Nvidia’s stock update.
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