By Jeran Wittenstein and Ryan Vlastelica| Bloomberg
The stock market turmoil unleashed by the artificial-intelligence industry reflects two fears that are increasingly at odds.
One is that AI is poised to disrupt entire segments of the economy so dramatically that investors are dumping the stocks of any company seen at the slightest risk of being displaced by the technology.
The other is a deep skepticism that the hundreds of billions of dollars that tech giants like Amazon.com Inc., Meta Platforms Inc., Microsoft Corp. and Alphabet Inc. are pouring into AI every year will deliver big payoffs anytime soon.
The dueling anxieties have been brewing for months. But they’ve shifted to the center of the stock market over the past two weeks. The result has been a series of punishing selloffs that have hammered dozens of companies across a number of industries — from real estate services and wealth management, to insurance brokers and logistics firms — and wiped more than $1 trillion from the market values of the big tech companies investing the most in AI.
“There is a contradiction when it comes to what investors are worried about when it comes to AI,” Julia Wang, the north Asia chief investment officer at Nomura International Wealth Management, told Bloomberg Television. “Those two things can’t be true at the same time.”
The shift marks a major break from the sentiment of the last few years, when speculation that AI would set off a transformative productivity boom kept pushing stock prices higher. While big tech stocks kept rising — sending Meta surging nearly 450% from the end of 2022 until the start of this year, and Alphabet up more than 250% — the hand-wringing over whether it was a bubble about to burst did little to derail the rally.
That began to change late last month as earnings reports from some of the biggest tech companies started to spook investors, who are growing impatient that the spending has yet to produce a commensurate windfall in revenues.
Microsoft, Amazon, Meta, and Alphabet alone are expected to spend more than $600 billion on capital expenditures in 2026. That’s hoovering up free cash flows and loading the companies with depreciating assets, radically altering many of the characteristics that have helped fuel the firms’ rise over the past decade.
“This is a real no-win situation,” said Anthony Saglimbene, chief market strategist at Amerprise Advisor Services. “Investors were comfortable saying, ‘so long as it happens in the future, I’m comfortable with Microsoft or Amazon or Alphabet spending the money.’ Now they want to know more immediately when the payback will come — and we don’t have a clear picture.”
Source: Drudge Report
