Tech’s AI dreams spook investors

Big tech’s $660 billion spending surge sparks AI bubble
worries among investors – but they’re short-sighted
worries, asserts the CEO of one of the world’s largest
independent financial advisory organizations.

The analysis from deVere Group’s Nigel Green comes as tech
stocks sold off heavily after the major companies in the sector
revealed plans to spend $660bn this year on artificial intelligence.

Amazon, Google, Microsoft and Meta are planning a surge in capital
expenditure on data centres and specialist chips that pushes
combined outlays well beyond last year’s $410bn, a jump of
around 60% and a sum that rivals the output of mid-sized economies.

Amazon has gone furthest, warning that capex will hit $200bn this
year alone, $50bn more than markets expected, eclipsing already vast
commitments from Google and Microsoft.

Nigel Green says: “The scale has unsettled shareholders
despite strong cloud revenues, wiped hundreds of billions from
market values, and revived familiar questions about whether the AI
arms race is drifting from strategic investment into excess
without the genuine performance.”

“While these concerns are understandable, and I believe the
AI reckoning on profitability has already begun, it could be
argued that these fears among AI investors are
short-sighted.”

He continues: “The size of the number is what unnerves
people, but the framing is wrong. This is not capital being sunk
into a single product that has to quickly justify itself.”

“What’s being built is a foundational layer that
underpins everything that these companies do, and will do in the
future.”

The deVere CEO argues that the market reaction ignores how this type
of investment actually works.

“Much of the spending is concentrated upfront, yet
it’s going into long-lived infrastructure. The accounting
impact is spread over many years, even if the cash commitment
happens immediately.”

He says expectations of a neat, standalone payback also miss the
point.

“AI doesn’t need to show up as a separate revenue
stream to generate returns. Its value appears through stronger
customer retention, greater pricing leverage and lower churn
across existing platforms.”

“Even marginal improvements at that scale translate into
substantial, recurring gains.”

The cloud businesses are where the economics become clearer.

As AI workloads mature, they lock customers in and command
higher-value contracts. Over time, this supports stronger margins
rather than eroding them. These cloud platforms already generate
exceptional profitability, and advanced AI deepens that advantage.

Nigel Green adds that part of the spending is defensive by
necessity. “Maintaining relevance requires scale. The market
may dislike the competitive escalation, but for the companies
involved, standing still is not an option.”

He concludes: “Volatility around these investments reflects
uncertainty about timing, not a collapse in the underlying logic.
Similar doubts surrounded earlier waves of infrastructure
spending, which later proved foundational.”

“This phase of AI investment is, I believe, laying
groundwork that is likely to support earnings power for many years
to come.”

“Under investing by these tech titans is perhaps the bigger
risk.”