Investors Concerned AI Bubble Is Finally Popping

"Amazon shares tumbled nine percent Friday morning after claiming that its spending would hit an astronomical $200 billion this year as part of its efforts to keep up in the ongoing AI race. Shares are down over eight percent over the last five days, indicating it's not just a blip. Microsoft has been hit hard lately as well, with shares also plunging almost eight percent over the last five days, following its biggest single-day loss since the pandemic last week."

"As CNBC reports, around $1.35 trillion in valuations has been wiped out as Big Tech companies committed to spending a total of $660 billion this year alone, a "breathtaking" figure, as AllianceBernstein head Jim Tierney told the Financial Times. But it doesn't take much reading between the lines to figure out that investors are becoming incredibly antsy about those enormous spending plans. A short-term return on investment for AI-focused infrastructure buildouts is certainly out of the question as tech leaders continue to reassure them that it will all be worth it in the end."

""Questions over the extent of [capital expenditures] as a result of LLM build-outs, the eventual return on that, and the fear of eventual over-expansion of capacity will be persistent," GAM Investments investment director Paul Markham told CNBC."

Massive AI-related capital expenditures by major technology firms have coincided with a sharp tech stock selloff. Amazon announced roughly $200 billion in spending, prompting a nine percent intraday drop and multi-day declines, while Microsoft and other leaders including Nvidia, Oracle, Alphabet, and Meta also experienced significant share losses. Collectively, roughly $1.35 trillion in market value has been erased as companies commit about $660 billion in AI spending this year. Investors are increasingly anxious about the scale and timing of returns from infrastructure buildouts, and persistent concerns over capex levels, eventual ROI, and potential capacity overexpansion could worsen the downturn.

Read at Futurism