AI bubble watch: Spooked market sparks $1 trillion tech sell-off

Are investors already tiring of technology’s golden goose, artificial intelligence?

Tech stocks took a hit on Wall Street on Friday, and the underlying cause appears to be concern over record spending on AI infrastructure. Microsoft, Amazon, Alphabet, Nvidia, Amazon, Meta and Oracle are just a few of the companies whose falling shares accounted for $1 trillion in losses on big tech stocks, as CNBC reported.

Big tech companies like Amazon and Google have furiously increased their capital spending to build AI data centers and focused on AI products and services.

The immediate spark for Friday’s sale was Amazon’s fourth-quarter earnings report. The e-commerce giant expects its capital spending to reach $200 billion in 2026. CNBC reported that Amazon’s investment figure was $50 billion higher than expected, and the stock market reacted accordingly.

Speaking to CNBC, GAM Investments chief investment officer Paul Markham explained why AI would affect these companies on the stock market.

“Questions about the scale of investments [capital expenditures] “Because of the development of LLM, the possible return on investment and the fear of possible over-expansion of capacity will be persistent,” Markham told CNBC.

However, investor reluctance towards AI appears to be a fairly recent development, at least when it comes to stock results. Just a few weeks ago, Meta, owner of Facebook and Instagram announcement it planned to allocate an additional 73% of its capital spending, or about $115 billion to $135 billion, to AI development. Unlike Amazon’s recent announcement, Meta shares rose 10% following this news.

However, there are also reasons to be skeptical about an AI bubble.

Also Friday, NVIDIA CEO Jensen Huang insisted that massive increases in capital spending were “justified,” as the tech leader told the hosts of CNBC’s “Halftime Report.” After he made the comments, CNBC reported that NVIDIA shares rose 8 percent.

NVIDIA is often seen as a bellwether of a possible AI bubble because the company sells the chips used by AI companies like OpenAI, Meta and Google. In Davos, Huang said the massive investment in AI seemingly proves it’s not a bubble. NVIDIA would of course be a big loser if AI turns out to be a bubble.

Still, there were signs that Amazon shares were rebounding slightly after Huang’s comments.