Skyrocketing AI infrastructure outlays have raised investor concerns over future returns and the potential for a bubble

US technology stocks tumbled sharply after Amazon, Microsoft, Google, and Meta announced plans to spend a combined $660 billion on artificial intelligence in 2026. Investors worried the companies' capital expenditures could outpace the technology's earnings potential.
 
Amazon, Google, and Microsoft have lost a combined $900 billion in market value since reporting quarterly results last week. The companies' spending plans exceed the GDP of Israel and overshadow strong growth in the companies' cloud businesses.

"AI bubble fears are settling back in," Brent Thill, an analyst at Jefferies, told the Financial Times on Friday. "Investors are in a mini timeout around tech, and nothing the companies say fundamentally matters." 
 
Amazon shares fell 7.8% in premarket trading on Friday after the company said its 2026 capital spending would reach about $200 billion, $50 billion more than expected. The shares later stabilized. CEO Andy Jassy said the funds were needed to expand AI, robotics, chips, and satellite projects.
 
Alphabet said it plans to nearly double its capital expenditures next year, with much of the increase going to cloud and AI projects, putting pressure on its stock despite posting over $400 billion in revenue in 2025. Microsoft shares fell 18% after reporting large data center spending and disclosing that 45% of its $625 billion book of future cloud contracts is tied to OpenAI. Meta initially rose on AI-driven advertising growth but later fell amid wider tech weakness.
 
Apple, which has kept AI infrastructure spending low, gained 7.5% after reporting record quarterly revenue of $144 billion. Its capital expenditure fell 17% in the fourth quarter to $2.4 billion.

Markets were also unsettled after confirmation that OpenAI's $100 billion investment and infrastructure deal with Nvidia did not proceed.

The spike in AI spending has raised concerns about a potential financial bubble. OpenAI has secured computing agreements with Nvidia, AMD, and Oracle worth over $1 trillion. Nvidia alone completed more than 100 AI-related venture deals in 2024. Analysts warn that much of the investment flows within a small group of closely linked companies, creating what they describe as circular financing that inflates market values beyond the industry's actual profits.
 
According to a recent PwC survey, most CEOs say their companies have not yet seen financial returns from AI, with only 12% reporting both higher revenue and lower costs.