It’s been a week from hell for tech stocks as AI spending plans caused upset across global markets and pushed investors to unplug hyperscalers from their portfolios.
Amazon has followed its peers by turning up the dial to max on AI spending, leaving investors with their jaws to the floor. The hyperscalers are so confident that AI will change the world, they’re spending big bucks to have the foundations to serve what they predict will be sky-high demand. Investors are becoming increasingly dubious about the level of spending, fearing these companies are wasting their money.
The FTSE 100 normally benefits when investors are in a risk-off mood, given its plethora of defensive-style companies which churn out profits no matter what’s going on in the world. However, investors were in a bad mood full stop. Only the energy sector got a proper break as oil prices moved up, benefiting BP and Shell. Banks and pharma did their best to nurse the FTSE 100 back to health, but it wasn’t enough to offset the major drag from tech, mining and industrial shares.
Stellantis
Shares in Peugeot-to-Fiat automotive group Stellantis have driven off a cliff after the company quantified the cost of a miscalculated bet on electric vehicles.
It is taking a €22 billion charge after admitting that it got it wrong on how quickly the world would transition from combustion engines to electric power.
Investors have suffered a double blow alongside the massive share price sell-off as they won’t be getting a dividend this year.
The long-held argument about why many drivers won’t go electric yet are concerns about price, access to charging infrastructure, and how long a battery will last during their journey.
However, prices are coming down, more chargers are being installed, and battery range is improving. The success of companies like BYD even suggests there are plenty of people willing to take the leap. That begs the question as to whether Stellantis’ frustration over its EV sales is linked to market issues or that drivers simply don’t like its vehicles.
Amazon
It’s been obvious for a while that the market isn’t a fan of huge AI spending commitments from the big tech contingent and the reaction to Amazon’s latest update is just the latest example.
Piling billions into artificial intelligence, in what seems a never-ending spending splurge, has the feel of a kid let loose in a candy shop. The damage done to Amazon shares in pre-market trading is the equivalent of a stern rebuke from a parent.
The scale of Amazon’s proposed outlay for 2026 is unquestionably astonishing and, significantly, is even more than rivals like Google and Microsoft have committed to.
All the hyperscalers are competing to win the AI race, for which the prize could be significant. However, investors are being asked to countenance enormous amounts of cash going out the door in service of this goal.
With the exact direction and trajectory of artificial intelligence still uncertain there is understandable concern that this money could be wasted.
Compounding matters, Amazon’s earnings for the last three months of 2025 and outlook for the current quarter were weaker than anticipated. One silver lining was cloud computing which saw better growth than the market had expected.
Amazon needs to demonstrate AI spending can give it the kind of edge Google-owner Alphabet has recently carved out with its Gemini chatbot and custom-made chips. Amazon’s own efforts in this area have not been as well received to date.
Russ Mould: Investment Director
Russ Mould is AJ Bell's Investment Director. He has a Master's degree in Modern History from the University of Oxford and more than 30 years' experience of the capital markets.
He started out at Scottish...
