New York, Feb 7, 2026, 12:43 (EST) — The market closed amid a mixed sentiment surrounding the recent surge in artificial intelligence (AI) investment. As major technology firms prepare for a busy week ahead, investors remain divided on whether the escalating costs associated with AI initiatives are justified. Amazon.com (AMZN.O) experienced a notable decline of 5.6% on Friday, while Nvidia (NVDA.O) saw a significant rise of 7.9%. The AI spending forecast from Amazon and other cloud giants such as Microsoft, Alphabet, and Meta is now estimated to approach $600 billion for 2026.
The Dow Jones Industrial Average exceeded the 50,000 mark for the first time in history on Friday, while the Nasdaq index continued to lag, down 0.9% year-to-date. Amazon faces mounting capital expenditures, with projected spending set to reach $200 billion in 2026, a sharp increase from $131 billion planned for this year. Shares of Amazon dropped 11.5% in after-hours trading on Thursday. CEO Andy Jassy highlighted that Amazon Web Services (AWS) has achieved an annualized run rate of $142 billion, reporting a 24% growth to $35.6 billion.
As Wall Street shifts its focus to profitability and margins, investors are questioning when this substantial outlay will yield tangible benefits rather than merely expanding capacity. Alphabet (GOOGL.O) is preparing for up to $185 billion in capital spending for 2026, while Microsoft (MSFT.O) fell 5% as the Nasdaq declined 1.59% Thursday, marking its lowest close since November. Tom Hainlin, a strategist at U.S. Bank Wealth Management, noted, “We’re seeing this volatility about whether this investment will translate.”
The software sector has borne the brunt of these uncertainties. The S&P 500 software and services index dropped 4.6% on Thursday, wiping out approximately $1 trillion in market value since January 28 as investors reacted to fears surrounding the rapid emergence of new AI tools threatening established players in the industry. “A sell-everything mindset,” described the mood by Dave Harrison Smith, the tech investment lead at Bailard.
Analysts suggest that the movement in the market has been driven more by scale than direction. MoffettNathanson pointed out that “the magnitude of the spend is materially greater than consensus expected,” cautioning that this surge is reminiscent of the dot-com era. While investment flows continue towards the “picks and shovels” of the data center boom—namely the hardware—some software segments appear to be struggling to attract interest.
Recent analysis from Reuters indicates a fragmentation in the global AI trade, with capital expenditure on the rise, debt increasing, and investors competing to identify the market winners. The traditional harmony among major tech players such as Amazon, Apple, Alphabet, Meta, Microsoft, and Nvidia appears to be deteriorating, as Barclays equity strategists point out that the correlation among these companies has fallen to its lowest level in a decade. Michael Toomey, managing director for equities trading at Jefferies, remarked, “Never seen sentiment this negative” in software stocks.
On a more positive note, chip stocks rallied on Friday, rising sharply after Nvidia CEO Jensen Huang stated that demand for AI chips is “going through the roof.” Shares of AMD and Broadcom also rose in tandem with Nvidia, reflecting optimism in the hardware sector.
However, Big Tech could face headwinds if the surge in capital expenditures begins to exert pressure on financial metrics. As depreciation rises and operational costs increase, the timeline for return on investment may extend, potentially squeezing free cash flows. Investor tolerance for delays is waning, and a potential spike in bond yields might further challenge long-duration growth stocks.
While the market is currently closed, traders are preparing for pivotal upcoming economic indicators: the U.S. January jobs data is set to be released on Wednesday, Feb. 11, followed by January’s CPI inflation numbers on Friday, Feb. 13, both scheduled for 8:30 a.m. ET. The spotlight for AI demand will also intensify later this month, as Nvidia prepares to unveil its earnings report and conduct a call on Feb. 25, a date that is anticipated by those assessing the translation of AI spending into actual orders.
See also
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