Shares of Amazon plunged more than 9 percent on Friday, driving a broader sell-off in Big Tech stocks that has erased over US$1 trillion in market value in just one week, amid investor concerns that rapid spending on artificial intelligence (AI) could be inflating a bubble.
The e-commerce giant’s steep decline followed its announcement of a significant increase in capital expenditures, joining other major technology firms, including Alphabet, Microsoft, and Meta, in signaling continued heavy investment in AI and related infrastructure.
Amazon’s shares fell 8.2 percent to US$204.25, while Alphabet lost 2.9 percent, Microsoft dipped 0.4 percent, and Meta fell 2.1 percent, according to FactSet data. By contrast, Nvidia and Oracle saw gains of 6.3 percent and 2.9 percent, respectively, as investors responded differently across the sector.
Combined, Amazon, Microsoft, Nvidia, Meta, Alphabet, and Oracle have shed more than $1 trillion in market value over the past week. Analysts attribute the sell-off to a mix of investor caution over AI spending, concerns about the pace of capital expenditures, and uncertainty about the long-term returns on these investments.
According to the Financial Times, the four companies reported roughly US$120 billion in capital expenditures in the fourth quarter alone, a figure that could surpass US$660 billion for the full year—higher than the annual gross domestic product of countries such as the United Arab Emirates, Singapore, and Israel.
“Questions over the extent of capital expenditures for AI build-outs, the eventual return on that investment, and fears of over-expansion will continue to weigh on the sector,” Paul Markham, investment director at GAM Investments, told CNBC. “Sentiment contagion is taking hold, and hardware developers for AI are likely to see ongoing volatility.”
Despite the sell-off, some investors remain cautiously optimistic. John Belton of Gabelli Funds said he was “pretty comfortable” with where large tech firms are currently trading, suggesting that while near-term volatility is expected, fundamentals in leading AI and tech companies remain strong.
The divergence in market reactions reflects differing investor perceptions of the companies’ spending plans. Wall Street welcomed Meta and Alphabet’s forecasts but appeared to punish Amazon and Microsoft for their aggressive capital expenditure plans, indicating that investor tolerance for large-scale spending may be uneven across the sector.
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The latest downturn follows a year of intense investment in AI, with companies racing to develop large language models, cloud computing infrastructure, and AI-driven applications. Analysts warn that while AI has transformative potential, the scale of investments raises the risk of an overheated market and underscores the importance of measured capital allocation.
Big Tech’s surge in spending is driven by the belief that AI will become central to future revenue streams. Amazon, for example, is investing in AI to enhance its e-commerce operations, cloud services, and logistics capabilities. Microsoft, Alphabet, and Meta are similarly focusing on AI to bolster their cloud, advertising, and metaverse-related offerings.
Market observers note that volatility may persist as investors reassess valuations and the speed at which AI adoption can generate returns. Companies developing the hardware and software to support AI expansion are likely to experience continued price swings, reflecting both excitement about growth prospects and caution about potential overcapacity.
The sell-off underscores the fine line Big Tech faces between capitalizing on emerging technologies and maintaining investor confidence. While AI promises to reshape multiple industries, the pace and scale of investment are prompting scrutiny from both analysts and shareholders, highlighting the challenges of sustaining growth amid uncertainty.
