Big Tech earnings put AI spending plans under investor scrutiny

Investors had already questioned whether AI spending pays off, after a pension-fund retreat from US equities in early October and an OpenAI revenue shortfall.

Investors are weighing the cost of AI spending as the largest technology companies report results. Amazon, Alphabet, Microsoft and Meta Platforms together aim to spend more than $700 billion on AI infrastructure this year, Motley Fool reported on Oct 27. The same report said the message is that this spending will continue beyond 2026.

Startup Fortune reported on Oct 27 that Alphabet has guided to 2026 capital spending of $205 billion. It said Amazon's figure is about $220 billion, after CEO Andy Jassy raised it by $20 billion.

Nvidia gained nearly 1 per cent after announcing a $3 billion investment in Meta Platforms' equity offering. Meta Platforms fell 1.64 per cent and Microsoft fell 0.24 per cent.

Earlier this month, a pension fund retreated from US equities over AI risk, on Oct 5. On Oct 8, OpenAI reported a revenue shortfall against the run rate it had signalled. Both developments raised doubt about whether capital committed to AI buildouts is matched by returns. Earnings commentary from companies spending heavily on AI infrastructure now gives that doubt a trigger tied to reported results. The financing needs of SpaceX for chips, and the gap between OpenAI's revenue and its plans, suggest the market is increasingly pricing a mismatch between AI capital outlays and demonstrated revenue. The large technology names most exposed to that spending are the ones under the most pressure.