Worries about an AI bubble trigger sell-off; U.S. tech giants lose over $1 trillion in market value in a week

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Market concerns about the return on capital invested in artificial intelligence are causing sharp volatility in the US tech sector. Over the past week, tech giants such as Microsoft, Nvidia, Amazon, Alphabet, Meta, and Oracle have collectively lost about $1.35 trillion in market value. The core reason is that investors are increasingly questioning whether the hundreds of billions of dollars in capital expenditures in this field can translate into actual profits.

On February 6, according to FactSet data, these companies have shown sustained capital expansion plans in recent financial reports. Media reports say that global tech giants plan to invest about $660 billion in AI-related infrastructure this year, a scale that surpasses the GDP of several medium-sized economies. Investors worry that such massive investments may be hiding risks of inefficient investment and overcapacity.

Paul Markham, Director of Investments at GAM Investments, pointed out that the market is currently enveloped in an "emotional contagion effect," especially among companies involved in AI hardware and infrastructure, where stock price volatility may intensify. He noted:

“The enormous capital expenditures required for building large language models, the cycle of final return, and potential concerns about overcapacity have become structural issues that continue to suppress market sentiment.”

Although some stocks saw a slight rebound in premarket trading on Friday, Amazon still recorded a significant 9% decline during the US trading session, reflecting that the market’s view on the commercial prospects of AI is shifting from optimism to caution. This wave of sell-offs driven by anxiety over capital returns marks the transition of the AI investment narrative from the stage of worshipping scale to the period of efficiency testing.

Amazon’s Aggressive Bet on AI Cloud Infrastructure, Apple’s Cautious Strategy Gains Market Approval

Amazon launched the most aggressive capital expenditure plan in the industry this earnings season, with the funding focused on its cloud computing business, AWS. Quilter Cheviot consumer goods analyst Mamta Valechha noted:

“The market’s core focus is Amazon’s capital expenditure guidance of up to $200 billion, a 56% year-on-year increase, which not only far exceeds expectations but also ranks first among major cloud service providers.”

She further stated that although management emphasizes long-term strategic value, the lack of transparency in the short-term return path has already triggered investor concerns. She said:

“Market sentiment is shifting from ‘fear of missing out on the AI wave’ to ‘scrutinizing the efficiency of every input and output link.’”

Unlike other tech giants, Apple’s capital expenditure in AI is relatively cautious, yet it has recently gained market approval. Also, thanks to what CEO Tim Cook described as “astonishing” demand for the iPhone, its stock price has risen 7% since Monday.

The market is undergoing a systemic re-evaluation of high capital expenditure models. As doubts grow regarding the sustainability and return pathways of capital in the AI sector—especially in hardware R&D and other heavy-investment links—the stock prices of related companies are expected to continue experiencing volatility and downward pressure. Morningstar Chief Equity Strategist Michael Field noted:

“Investing in tech giants is now polarized: either excess returns from AI success, or huge capital losses due to failed investments.”

Risk Warnings and DisclaimerThe market is risky, and investments require caution. This article does not constitute personal investment advice, nor does it take into account the specific investment goals, financial circumstances, or needs of any individual user. Users should consider whether any opinions, views, or conclusions in this article fit their specific situation. Investment based on this is at your own risk. ```