A Bank of America survey found a record net 35% of fund managers say companies are overinvesting in AI, up from 14% months earlier. Microsoft and Amazon both sold off after earnings reports that highlighted their spending, while combined AI capital expenditure across four US tech giants is projected to reach $600 billion to $725 billion by 2026.
US technology companies are no longer being rewarded by the stock market for pouring money into artificial intelligence infrastructure, and investors are asking where the return is. Microsoft, Alphabet, Amazon, and Meta are projected to spend a combined $600 billion to $725 billion on AI-related capital expenditures by 2026.
Spending on track to quadruple in three years
That figure is up from roughly $150 billion in 2023, putting the four companies on course to roughly quadruple their AI infrastructure spending in three years.
Looking further ahead, Goldman Sachs estimates total tech spending on AI infrastructure could reach $7.6 trillion by 2031, more than the GDP of every country on Earth except the US and China.
Fund managers say the spending has gone too far
Investor patience is thinning. A Bank of America survey of fund managers found a record net 35% believe companies are overinvesting in AI, up from 14% just months earlier.
Meanwhile, Microsoft's shares fell over 11% following an earnings report that highlighted its aggressive spending trajectory. Amazon dropped more than 8% on similar news.
Some analysts have flagged that certain firms could be outspending their free cash flow by 2027 — meaning they might burn more money on AI than their entire business generates in spare cash.
The pressure compounds because all four major players are racing each other. Microsoft is locked into its OpenAI partnership and building out Azure AI capacity, while Google defends its search dominance and pushes Gemini. Amazon is scaling Bedrock and custom chips, and Meta is spending heavily on open-source models and AI-powered advertising.
What investors watch next
Investors are likely to become more selective, rewarding companies that can demonstrate actual AI revenue traction and punishing those that can only show spending plans. Free cash flow numbers in upcoming earnings reports are the figures to watch.
If AI-related revenue growth starts visibly closing the gap with capex, the narrative shifts back to bullish. If not, more 8-11% post-earnings drops are the expected result.
Source: Crypto Briefing
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