Big Tech’s $600 billion spending plans exacerbate investors’ AI headache

By Lucy Raitano and Dhara Ranasinghe

LONDON, Feb 6 (Reuters) – A planned $600 billion artificial intelligence spending splurge by big tech firms in 2026 is adding to investor unease as they assess the implications for profitability as well as a potential existential threat to software firms.

Amazon, which said its capital expenditure could double from a year ago, fell sharply in pre-market trading on Friday, while shares in other big tech companies rose and Wall Street stock futures firmed. 

Meanwhile, shares in data analytics firms continued to come under selling pressure on concerns that they face an existential threat from powerful new AI models.

London-listed RELX’s shares were down 4.8% and set for a 17% tumble in their worst week since 2020, while the S&P 500 software and services index <.SPLRCIS> has fallen almost 10% this week and India’s IT index has shed around 7%.

Alphabet and Amazon, members of the so-called Magnificent 7 group of the largest U.S. companies, revealed plans this week to spend much more than anticipated on AI infrastructure.

While markets reacted with concern, knocking the shares, analysts said they have room because they are profitable.

Although analysts said the stock market selloff has been overdone, investors remain cautious.

“Headlines that would have pushed shares to fresh highs during the peak of AI optimism are now being interpreted far more cautiously by investors,” said Carlota Estragues Lopez, equity strategist at St. James’s Place in London. 

“It’s not just return on investment that worries investors, but also the risk of narrow market leadership that struggles to broaden beyond a handful of mega-cap names.”

JOLT TO DATA ANALYTICS FIRMS

A selloff in software and data and analytics firms was triggered by a new plug-in from Anthropic’s Claude. 

Shares in London Stock Exchange Group clawed back some ground on Friday, but the price was still down almost 6% for the week in a second straight week of sharp losses.

This week’s drawdown in AI-exposed shares has weighed on broader equity markets. 

Global shares are on track for the worst week since November, down 1.6%. 

The broad S&P 500 index is off 2%, while U.S. software and data services companies have seen around $1 trillion in market value evaporate since January 28.

The rout has been particularly acute in India, where shares of software exporters plunged another 2% on Friday as they ended a week that has seen $22.5 billion in market value losses. 

Investor nerves over potential AI‑driven disruption are coinciding with a growing tendency to punish big tech firms for signaling even heavier spending on the technology.

Google parent Alphabet also upped its spending plans on Thursday, sending its shares as much as 8% lower at one point, although they ended the day flat. Alphabet’s shares were trading flat in pre-market trading on Friday.

“Both Alphabet and Amazon delivered strong underlying business performance, driven by better-than-expected growth in cloud. But that hasn’t been enough to distract markets from their ballooning capital investment plans,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown. 

(Reporting by Lucy Raitano and Dhara Ranasinghe; Editing by Amanda Cooper and Alexander Smith)