Capital expenditure exceeds GDP! Silicon Valley giants bet $660 billion on AI, but the market becomes more anxious as it burns more cash

The record AI investment plans of American tech giants are reigniting market fears of a bubble. Despite most companies delivering strong earnings reports, investors are uneasy about the "stunning" scale of capital expenditures, worrying that these investments are outpacing the profit potential of new technologies, leading to a collective sell-off of tech stocks.

After Amazon, Google, and Microsoft released their quarterly earnings reports last week, a total market value of $900 billion evaporated. These three companies, along with Meta, plan to invest $660 billion in data centers and dedicated chips by 2026—an amount exceeding Israel's GDP, a 60% surge from $410 billion in 2025, and a staggering 165% increase from $245 billion in 2024.

Investors are shocked by this massive capital expenditure plan, even though these companies' cloud businesses have achieved strong revenue growth. Jim Tierney, head of the concentrated U.S. growth fund at AllianceBernstein, stated, "The scale of capital expenditures is astonishing."

This wave of sell-offs indicates that the market's patience with the AI investment return cycle is wearing thin. The only exception is Apple, which chose not to participate in the AI capital expenditure arms race; its stock price rose 7.5% after the earnings report, setting a record for sales.

$660 Billion Spending Plan Triggers Chain Reaction of Declines

The capital expenditure plans of tech giants far exceeded market expectations. Amazon announced after hours on Thursday that its capital expenditures for this year would reach $200 billion—$50 billion higher than expected, surpassing the already staggering figures from Google and Microsoft, leading to an 11% drop in stock prices.

CEO Andy Jassy argued that such large-scale investments are to prepare for prosperity in AI, chips, robotics, and satellites. He pointed out that the 24% revenue growth of Amazon Web Services (AWS) proves that the investments are starting to pay off.

Microsoft faced the most severe blow, with its stock price dropping 18% since it released its earnings report last Wednesday. Although its cloud business revenue grew 26% to $51.5 billion, this growth rate was slightly below expectations, and a 66% surge in quarterly data center spending raised market concerns.

Microsoft also disclosed for the first time its level of dependence on OpenAI—45% of its $625 billion future cloud contract book comes from this startup, and analysts are wary of its over-reliance on a single client.

Even Google's record profits failed to alleviate market worries. Its parent company Alphabet achieved annual revenue exceeding $400 billion for the first time, with profits reaching $132 billion in 2025, but its plan to double capital expenditures to $185 billion still weighed down its stock price.

Extended AI Return Cycle Heightens Investor Anxiety

The rising capital expenditures indicate that realizing the full promise of AI will require more time and funding. This signal is testing investors' confidence in long-term returns.

"Higher capital expenditures send the signal that the realization of AI strategies may take longer," said Dec Mullarkey, managing director at SLC Management, which manages $300 billion in assets. "This is not good news for investors who are already focused on when they can see AI-related revenues." "

AllianceBernstein senior analyst Anna Nunoo stated that this quarter's financial reports brought a "shock of increased capital expenditures," and that "Microsoft and Amazon are responsible for proving that all this spending can yield attractive returns." Jefferies analyst Brent Thill pointed out:

"Concerns about an AI bubble are resurfacing. Investors have taken a wait-and-see approach to tech stocks, and what companies say has fundamentally become irrelevant."

The shift in market sentiment is evident. The Nasdaq index, concentrated in tech stocks, has fallen 4% in the past five days. Software stocks have also been impacted, with concerns that new AI coding tools from Anthropic and OpenAI could disrupt their businesses.

The news that a $100 billion investment and infrastructure deal between OpenAI and Nvidia failed to materialize has also exacerbated market turmoil. Oracle, which heavily relies on OpenAI's future cloud business, despite raising $25 billion in debt and insisting it is "highly confident in raising funds and fulfilling commitments to OpenAI," still saw its stock drop 18% within five days.

Apple Emerges as the Sole Winner with a "Zero Investment" Strategy

In this earnings season, Apple has emerged as the clear winner. The company reported record quarterly revenue of $144 billion, driven by a surge in sales of the iPhone 17 in the U.S. and China.

More notably, Apple's capital expenditures in the fourth quarter of last year fell 17% to $2.4 billion, totaling about $12 billion for the year—starkly contrasting with peers who often invest hundreds of billions.

In January, Apple reached an agreement with Google to use Gemini to upgrade its AI capabilities, including the Siri voice assistant. Dan Hutcheson, vice president of market intelligence firm TechInsights, stated, "Apple's minimal capital expenditures are a result of collaborating with Google to gain AI dividends from computing and cutting-edge models. This has transformed Apple's AI capital expenditures into a pay-as-you-go model," with the iPhone manufacturer outsourcing most of the underlying infrastructure costs to Google.

Hutcheson added that this partnership "absolutely" explains part of the reason for Google's increased capital expenditure plans for 2026.

Market Expectations Take a Sharp Turn

As the world's most valuable publicly traded company, chipmaker Nvidia will report its earnings later this month, facing a turbulent market. After being asked to accept rising capital expenditures for over three years, investors are looking for signs that spending based on AI beliefs is about to end.

Drew Dickson, founder of Albert Bridge Capital, summarized: "This is a crazy time. We have evolved from an environment where capital expenditures alone were enough to spark frenzy to a market that expects it to translate into revenue growth within a meaningless timeframe."

Last week, Meta also announced it would double its capital expenditures to $135 billion, but after demonstrating how AI can enhance advertising effectiveness, its stock initially rose 10%. However, these gains have since been erased in a broader market sell-off The combined annual revenue of the four companies grew by 14% to $1.6 trillion, which is still not enough to overcome the market's pessimism. After more than three years of optimism about the prospects of AI, investor confidence is being tested like never before