U.S. technology stocks demonstrated recovery on Friday following three days of significant losses driven by investor apprehensions regarding substantial investments in artificial intelligence (AI) by major companies. Amazon’s shares fell by 6% after announcing a projected capital expenditure of $200 billion for the year. However, the Nasdaq Composite index increased by 1.9%, although it remains over 2% lower for the week.
Leading the rebound, Nvidia saw a notable rise of 7.7%. Market concerns have been primarily focused on the scale of AI investments, which have raised questions about the sustainability of business models for less capital-intensive companies, such as data analytics and software providers. Fabiana Fedeli, Chief Investment Officer for Equities at M&G, noted that investors are becoming more selective in their AI-related investments.
Tech giants Amazon, Google, Meta, and Microsoft have collectively planned to invest $660 billion in AI this year, marking a 60% increase compared to expected spending in 2025. This surge in investment has intensified investor scrutiny about the timelines for potential returns. Michiel Plakman, Head of Global Equity at Robeco, expressed concerns about significant expenditures without clear payoffs, emphasizing the need for careful evaluation of individual firms.
Moreover, the recent launch of open-source plug-ins by AI group Anthropic aimed at automating specific corporate tasks has raised further alarm, triggering a sell-off in certain software stocks perceived to be at risk. Despite this, some investors, including Caroline Shaw from Fidelity International, view the downturn as an opportunity, suggesting that essential corporate software will not be quickly replaced by AI technologies.
Additionally, Bitcoin experienced volatility, dipping below $65,000 but rebounding to nearly $71,000 by Friday.
Bold Points:
- Why this story matters: The volatility in tech stocks reflects broader market sentiment towards AI investments and their potential impact on various sectors.
- Key takeaway: Increased investments in AI by major firms have led to cautious investor behavior and a reevaluation of corporate earnings strategies.
- Opposing viewpoint: Some analysts argue that the downturn is overdone and presents a buying opportunity for mission-critical corporate software.
