Big Tech Stumbles as AI Spending Raises New Questions
Large-cap technology stocks extended their decline last week, adding to an already disappointing start to 2026. After nearly three years of AI-driven dominance, the momentum behind the “Magnificent Seven” appears to be cooling, at least for the time being. AI-related optimism has powered US equity markets since 2023, but early signs this year suggest a potential shift in leadership. Value stocks have begun to outperform growth stocks, and market participation is broadening beyond a narrow group of mega-cap companies.
A $650 Billion Commitment to AI
The recent weakness follows a wave of capital expenditure announcements from four major technology companies, outlining historically large investment plans for 2026.
• Amazon expects capital expenditures of approximately USD 200 billion (Bloomberg, 06.02.2026).
• Alphabet plans to spend between USD 175–185 billion (Bloomberg, 05.02.2026).
• Meta plans to spend between USD 115 and 135 billion (Yahoo Finance, 29.01.2026)..
• Microsoft’s annualized run rate suggests roughly USD 145 billion in capital expenditures for its 2026 fiscal year (Yahoo Finance, 06.02.2026).
Together, these companies plan to spend nearly USD 650 billion, primarily on AI chips, data centers, and cloud infrastructure. While these commitments highlight the strategic importance of artificial intelligence, they also raise key questions. Investors are increasingly asking whether these companies can execute on such ambitious plans and how long it will take for the massive spending to translate into meaningful profits.
Strong Results, Softer Reactions
Interestingly, the recent sell-off has occurred despite solid operational performance. At this stage of the Q4 reporting season, Nvidia remains the only Magnificent Seven member yet to release December-quarter results. Based on reported figures from the other six companies and estimates for Nvidia, total Q4 earnings for the group are expected to increase by about 24% year-over-year, driven by revenue growth of nearly 19%. This follows Q3 earnings growth of 28% on revenue growth of 18%(Yahoo Finance, 06.02.2026).
The group’s influence remains substantial. In 2026, the Magnificent Seven are projected to generate approximately 26–27% of total S&P 500 earnings (Yahoo Finance, 07.02.2026), while representing more than one-third of the index’s total market capitalization. However, investor sentiment appears more cautious. Elevated valuations combined with accelerating capital expenditure have made markets increasingly sensitive to any signs that AI revenues are not growing fast enough or that profit margins could come under pressure.
Broader Market Rotation?
It remains unclear whether the recent pullback is simply a pause in the long-term AI growth story or the start of a broader shift toward value stocks. What is clear, however, is that investors are increasingly questioning both the market’s reliance on a small group of technology giants and the scale of capital spending required to sustain AI expansion.
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