Martin Gamble on US markets: Amazon’s AI spending splurge, crypto collapse

It’s been a noisy week on Wall Street. A crypto collapse, with Bitcoin hitting its lowest level since October 2024, hit companies tied into that ecosystem. Meanwhile AI helped drive selling in two separate parts of the market.

Continuing concern about the level of artificial intelligence spending by big tech saw Amazon, in particular, heavily punished while the threat of AI disruption to software and data businesses prompted heavy selling in these areas.

Coming out rather better were some ‘old economy’ industrial names including Ball Corp as its fourth-quarter numbers came in ahead of expectations.

The better performance in some less fashionable parts of the market was reflected in the relatively resilient showing of the Dow Jones Industrial Average index which has a lower weighting towards technology.

Other names under pressure included PayPal whose shares collapsed on a big profit miss and the exit of CEO Alex Chriss.

Alphabet

There was a lot of anticipation heading into Alphabet’s fourth quarter results on 4 February given the shares had run up more than 60% over the last six months and the Google-owner didn’t disappoint.

Revenues and EPS (earnings per share) came in ahead of analysts’ expectations, displaying year-on-year growth of 17% and 31% to $113.8 billion and $2.82, respectively.

CEO Sundar Pichai said: “It was a tremendous quarter for Alphabet and annual revenues exceeded $400 billion for the first time. The launch of Gemini 3 was a major milestone, and we have great momentum”

The market reaction wasn’t so rosy however, with the shares dropping around 5% as investors digested the scale of Google projected capital expenditures.

The company said it plans to double capital expenditures in 2026 to between $175 billion and $185 billion to “meet customer demand and capitalize on the growing opportunities.”

This is roughly equivalent to the expenditures of the last three years combined and more than two times annual free cash flow. Investors are worried about Alphabet moving from an asset light business to an asset heavy business, putting pressure on free cash flows.

They are also calls for more granular details on where the money will be spent and the likely returns on these investments.

Walt Disney

Despite revealing fiscal first quarter revenues and earnings ahead of market forecasts, shares in the ‘House of Mouse’ fell 7% on 2 February as Disney flagged headwinds in its international parks division and higher programming costs.

Disney said current parks chief Josh D’Amaro will become CEO on 18 March, succeeding Bob Iger who will remain a senior advisor to the board until the end of 2026.

This marks the second time Disney has appointed a successor to Iger after Bob Chapek was fired in 2022, prompting the return of Iger.

D’Amaro is a Disney veteran who has been with the company for 30 years and runs its biggest division which, delivered a record $10 billion of quarterly revenue and an operating profit of $3.3 billion.

The test for the incoming CEO will be whether he can balance Disney’s traditional entertainment businesses with his experiences-first background and successfully navigate Hollywood studios.

There could be fresh challenges and opportunities in both streaming and studios should Netflix succeed in its attempts to acquire Warner Bros Discovery.

Eli Lilly

Drug maker Eli Lilly delivered a strong fourth quarter and an outlook ahead of consensus expectations on 4 February on soaring demand for its weight-loss drug Zepbound and diabetes treatment Mounjaro.

The mid-point of Lilly’s 2026 revenue guidance implies 25% sales growth while adjusted earnings per share is projected to be $34.25, around 3% higher than analysts’ consensus estimate.

The guidance was in stark contrast to the latest outlook provided by Danish rival Novo Nordisk which warned that sales and profit could decline by around 13% in 2026.

Lilly said it expects to benefit from increased insurance coverage for obesity drugs in the US, continued worldwide demand and the expected launch of its oral weight-loss pill, pending regulatory approval in the second quarter.

The company’s US market share in weight-loss drugs increased to 60.5% in the fourth quarter, up from 58% in the prior period.  

The shares gained as much as 10% on 4 February, briefly pushing Lilly’s market value through the trillion-dollar mark.