The check has been written, but investors are terrified of the cost.
Big Tech firms have signaled plans for a massive $600 billion AI spending splurge in 2026, a revelation that has deepened investor anxiety rather than stoking optimism. Amazon (AMZN) and Alphabet (GOOGL) both announced capital expenditures could double this year to fund AI infrastructure, triggering pre-market volatility and raising sharp questions about ROI.
🌪️ THE “EXISTENTIAL” ROTATION: While the “Hyperscalers” spend, the “Application Layer” is getting crushed.
- The Software Slump: The S&P 500 Software & Services Index has fallen almost 10% this week, erasing roughly $1 trillion in market value since late January.
- The Catalyst: A new plug-in from Anthropic’s Claude has spooked the market, fueling fears that generative AI poses an existential threat to traditional data analytics and SaaS models.
- Global Impact: London-listed RELX is set for its worst week since 2020 (down ~17%), and India’s IT index has shed 7%, losing $22.5 billion in value.
💸 PROFIT vs. PROMISE: Analysts note a critical shift in sentiment.
- Carlota Estragues Lopez (St. James’s Place) observes: “Headlines that would have pushed shares to fresh highs during the peak of AI optimism are now being interpreted far more cautiously.”
- The Disconnect: Strong cloud earnings from Amazon and Google weren’t enough to offset fears of “ballooning capital investment plans.” The market is no longer rewarding the promise of AI; it is punishing the cost of it.
💡 ANALYST TAKEAWAY: We are witnessing a bifurcation of the AI trade. The “Infrastructure Builders” (Big Tech) are spending fortunes to own the rails, while the “legacy incumbents” (SaaS/Data) are being repriced as potential victims of the technology they are trying to adopt. The $600B capex bill suggests Big Tech believes the future is theirs—and the market is starting to worry they might be right, at the expense of everyone else.
👇 Tech Investors: Is the sell-off in SaaS an overreaction, or the correct pricing of a new deflationary reality for software?