Over the past week, sentiment toward artificial intelligence has clearly changed. The trigger: Big tech companies plan to spend a total of nearly $400 billion on AI infrastructure this year, raising questions about sustainability and profits.
Rapid increase in capital spending raises questions about AI economics
Microsoft set the tone last week by revealing $34.9 billion in quarterly capital spending, with nearly half going into GPUs and CPUs that power its AI systems. Alphabet plans to spend more than $90 billion in capital expenditures in 2026, Meta is forecasting $72 billion, and if you add Amazon, the total will exceed $380 billion.
This unprecedented spending is raising a new wave of concerns.
Investors are concerned that while the long-term AI opportunity remains intact, short-term economic conditions look strained. If revenue growth cannot keep up with rising infrastructure costs, profit margins may come under pressure. In a market where these stocks are already trading at high valuations, even a small disappointment can cause a major correction.
Market concentration risk comes back into focus
As the Magnificent 7 becomes more dominant, the market becomes more vulnerable. More than a third of the S&P 500 currently belongs to just seven companies, so any change in AI sentiment would have a disproportionate impact on the entire index.
Enthusiasm for AI will not disappear, but it will moderate.
Despite the market volatility, analysts say investors are not walking away from AI. Instead, the trend has changed from unbridled optimism to selective allocation. The long-term commercial potential of AI remains strong, but the path to monetization is uncertain and capital-intensive.
The emerging “circular economy” around AI, in which Big Tech companies buy GPUs, lease cloud capacity, and enter into multi-year computing contracts primarily within their own ecosystems, has also raised eyebrows. A multi-year supply agreement with NVIDIA further locks in spending, raising questions about whether growth will be demand-driven or market structure-driven.
